STEERING YOU THROUGH THE UNCERTAINTY: WEBCAST
April 23, 2020
Gain important context and insight from a panel of CIBC experts regarding the financial uncertainty caused by COVID-19: economic outlook, portfolio strategy, financial relief measures and the power of planning.
Transcript: Steering You Through the Uncertainty
[Onscreen Text: A CIBC Private Wealth Webcast. Recorded on April 17, 2020. CIBC Private Wealth Management. CIBC Wood Gundy.]
[Soft Music Plays]
[Onscreen Image: A still image of Ed Dodig]
[Onscreen Text: Steering You Through the Uncertainty. Ed Dodig, Managing Director & Head, CIBC Private Wealth Management & Wood Gundy]
Ed Dodig: Hello and thank you for joining us today. My name is Ed Dodig, managing director and head of CIBC Private Wealth Management Canada and CIBC Wood Gundy. We certainly continue to operate in challenging and unusual times.
[Onscreen Images: An empty baseball diamond with a sign attached to the fence saying, “Attention! Stay 6 Feet Apart. Respect Social Distancing”. A woman types on her laptop at home.]
Ed Dodig: We're all adjusting to a new normal, the way we manage our personal and professional lives as a result of COVID 19. That's why I'm pleased we can connect today to share some important perspectives on the current environment: the economic downturn, the market volatility, and what really matters for your longer-term wealth ambitions. Within all of this uncertainty, there are a couple of things I know for sure. The first is that we're here to help you navigate your financial matters and lend our support. The measures we have put in place at CIBC Private Wealth to safeguard our people and processes during this pandemic, including the ability to work from home, will enable us to continue to meet your needs. We are firmly focused on looking after our employees, our clients and our communities throughout the cycle.
[Onscreen Text: Unwavering Focus and Commitment:
Our Clients. Our Colleagues. Our Communities.]
Ed Dodig: Our hope, is that we're able to make the short term better while we plan together for the long term. So, let me be clear, if you have concerns or questions about your current financial situation, we're here to help. We understand that each situation is unique. Please speak with your advisor to explore how we can support you and your family in this environment. The second thing I know for certain is that it's never been more important to partner with professionals for an integrated approach to your wealth. The impact of events like this pandemic can have far reaching and sometimes unexpected impacts on your personal, family, and business financial position. At CIBC Private Wealth, we fundamentally believe that your wealth and your aspirations are unique and command a personalized and integrated approach, an approach that encompasses wealth strategies, disciplined investment management and sound stewardship. Which leads me to our speakers today.
[Onscreen Text: Steering You Through the Uncertainty:
Your host Ed Dodig, Managing Director & Head, CIBC Private Wealth Management & Wood Gundy
Your presenters Benjamin Tal, Managing Director & Deputy Chief Economist CIBC World Markets
Ian de Verteuil, Managing Director & Head, Portfolio Strategy, CIBC World Markets
Jamie Golombek, Managing Director, Tax & Estate Planning, CIBC Private Wealth Management
Lana Robinson, Executive Director, Wealth Strategies Group, CIBC Private Wealth Management]
Ed Dodig: I'm delighted to have a range of CIBC experts here to provide you with insights on the economy, investment portfolio strategy, the latest financial relief measures, and the heightened need for financial and estate planning. Let me start with Ben Tal, CIBC Deputy Chief Economist. Ben, definitely interesting times! We have been quickly plunged into the recession. With all of the current economic uncertainty, can you please shed some light on what we can expect moving forward?
[Onscreen Image: A still image of Benjamin Tal]
[Onscreen Text: Economic Update. Benjamin Tal, Managing Director & Deputy Chief Economist CIBC World Markets]
Benjamin Tal: Yes. Thank you, Ed. Clearly interesting times. And of course, you cannot talk about the economic situation without talking about the trajectory of the infection curve. So, let's start here, as you can see in the first chart, clearly, things are getting a bit better.
[Onscreen Text: Daily Growth in Number of COVID-19 Cases
Source, WHO, CIBC]
[Onscreen Graph: A line graph shows the daily growth of COVID-19 case in Canada and Italy.]
Benjamin Tal: We have a situation in which the curve is starting to flatten. The rate of growth is slowing. It's still rising, but the rate of growth is slowing. And the rate of growth of the rate of growth is actually negative, suggesting that we’re very close to the peak. So hopefully within a week or two, we might start to see a flattening in the curve, which is a very positive situation. Of course, that's not the green light and the economic damage is very, very visible. Just this week, Stats Canada released preliminary numbers for the first quarter GDP growth. It's a guess at this point, but it's roughly negative 10 percent, the first quarter with most of the damage, of course, being in March. The second quarter our forecast, which is a rough forecast of course, that we are going to see the economy declining by roughly 40 percent on an annual basis. That's something that we have to understand. This is damage we have never seen in our lifetime. The unemployment rate over the course of the quarter will rise to about 13, 14 percent. Unfortunately, we're going to see job loss of about 2.3 million people.
[Onscreen Images: An exterior shot of the U.S. Federal Reserve headquarters.]
Benjamin Tal: Just recently, the chairman of the Federal Reserve said that we might be in a recession. This is the understatement of the century. We are in a recession. We are in a deep recession. And we have to recognize that. However, given this kind of pain, the concession, of course, is to go back to normal as quickly as possible.
[Onscreen Images: A time-lapse shot of a bridge in Shanghai. A time-lapse shot of downtown Singapore. A time-lapse shot of the Frankfurt skyline. A time-lapse shot of a harbor in Sweden. A time-lapse shot of the Warsaw skyline. A close up of an escalator. Students entering the doors of a school.]
Benjamin Tal: We see countries like China, Singapore moving way too fast, trying to go back to normal. Countries like Germany, Sweden, Poland are starting to open stores, going back to semi-normal. Denmark is opening schools. So, things are starting to move. And we have to be very, very careful not to move too fast.
[Onscreen text: UK During Spanish Flu. Deaths Per 1,000. Source, WHO, CIBC]
[Onscreen Graph: A line graph illustrating the three peaks in deaths of the Spanish flu, from June 1918 to March 1919.]
Benjamin Tal: Because as you can see in the second chart, we have a situation in which those situations are coming in waves. The Spanish flu had three waves, three peaks, in 1918, twice, and then 1919. So, when people go back to normal too quickly, you have a second wave. I believe that is the risk now facing China. And in Singapore - we are seeing early stages of a second wave. So, we have to be careful here not to move too quickly. I think that's what we are going to do. And if that's the case, the way I picture our lives, if we move slowly, let's say by July or June, the way I see our life in three months from now is the following. Older people and people with precondition will be asked to stay home. People working from offices, namely large financial institutions, accounting firms, law firms, this kind of stuff that would be encouraged / told to maximize the number of people that would still be working from home to minimize interaction.
Benjamin Tal: In manufacturing and construction, we'll see flex hours and multiple shifts. Basically, trying to make sure that people are not working too close to each other. That will reduce productivity and the speed of completion and construction by maybe 40, 50 percent. But still there would be sites going and there would be some activity. Some stores will open again, but they will be basically function like the grocery stores.
[Onscreen Images: A grocery cart is pushed to a line on the floor that says “please wait here”. An aerial view of empty soccer stadium. Empty bleachers at a baseball field.]
Benjamin Tal: We will line up and minimize the number of people in this site, in the store at any point in time. And of course, large events probably will not be allowed. Baseball again, maybe it will be without an audience. This kind of life, I'm picturing three months from now. Not normal, but better than it is now. Now, of course, this has some implications on the trajectory of the recovery.
Onscreen Text: Composition of Labour Market by Vulnerability:
Source: Statistics Canada]
Benjamin Tal: Let me say something about the level market. If you look at the next chart or the table, you can see the composition of the labour market by vulnerability. Namely, when we go back to semi-normal three or four months now, what kind of vulnerability are we going to see in the labour market. And you can see that there are different vulnerabilities. For example, the essential workers will remain essential. In fact, their wages will go up, their bargaining power is rising, and they will be hiring, not firing people. Also, we see a minimum impact on government employment, public sector. The government is not in any mood now to lay off people. That's about 10 percent of the labor market. Some impact will be on office related jobs. Large companies will try to have a different reaction curve to the situation. They will not lay off people in big numbers, but they will try to cut costs. So, the compensation chanel, let’s say bonuses, this kind of thing. So, it's not going to be laying off people, but rather cutting costs for compensation. And more notable impact will be in construction, manufacturing, as I suggested. And we are going to see a situation in which some people, unfortunately, would have been laid off, but others will be working reduced hours. So, that's where we see some impact. And clearly we see some vulnerability, especially in the private services segment of the market, that will be the last to come back. That's roughly nine, 10 percent of the market. So, that's more or less where we are.
[Onscreen Image: A still image of Benjamin Tal]
[Onscreen Text: Economic Update. Benjamin Tal, Managing Director & Deputy Chief Economist CIBC World Markets]
Benjamin Tal: And when it comes to economic growth, unfortunately, given this scenario, it's not going to be a V-shaped recovery by any stretch of the imagination. Some people are hoping that by July or August, we'll be back to normal. It's not going to be the case, although we see after negative 40 percent in the second quarter GDP growth, we see GDP growth rising by 20, 30 percent in the third quarter. This is not a V-shaped recovery by any stretch of the imagination. And the unemployment rate will go down. But even in 2021, late 2021, we see still it at about 8 percent, which is 2 percent higher than it was before the crisis. So, there would be some permanent damage there. We have to recognize that. But clearly in the third quarter and fourth quarter, we'll see positive numbers after the significant decline in the second quarter. But it's not a V-shaped recovery by any stretch of the imagination.
Benjamin Tal: Now, very important. Some people are comparing the current situation to the Great Depression. And I think that's a very wrong thing to do. This is not a depression. This is not even 2008 in the sense that it is a depression or a fairly significant recession. You are in a freefall. There is nothing, there is no flow beneath you. We have to remember this crisis is significant economically speaking. However, this crisis, has an end game. The end game, of course, is the vaccine.
[Onscreen Images: Vials of a vaccine on an assembly line. A nurse places a needle into a vial. A highway with a large LED sign that says, “Keep your distance” and “6 feet between people”.]
Benjamin Tal: When we have a vaccine and this is maybe a year, 18 months from now, when we have a vaccine this crisis will be over. And in between, we have two layers of defense. One is, of course, the social distancing, that is working, flattening the curve. And the other, of course, is the anti-viral medication. And you are all aware of the news coming. People are getting more and more optimistic about an anti-viral medication coming in the coming few months. So those two layers of defense will make the situation better, because for the first time in a few months from now, we will feel that we are not totally defenseless against that virus. So, what we are doing now, and that's very important to understand.
[Onscreen Images: An aerial view of Parliament in Ottawa. A Time-lapse shot of a CIBC office tower at night.]
Benjamin Tal: What we are doing now; governments, central banks, banks, individuals and companies. What they're doing now, we are simply buying time. We are buying time until this end game. And that's why government policy is so important now. We have never seen this kind of situation ever, ever in our lifetime. But also, we have never seen this kind of government response in our lifetime.
[Onscreen Images: An aerial view of Parliament in Ottawa. An exterior image of the old Bank of Canada building.]
Benjamin Tal: And, you know, the government response, I will not get too much into it. The Bank of Canada has been fantastic in its response function to the crisis. And the reason why we need this policy response: Three reasons. One, we need to make sure that the financial system is functioning. There is not enough liquidity in the system. Number two, clearly, we have to provide short term support to people that are impacted, the sick, and of course, the unemployed. And third, to provide enough demand in the system to get us out of any deflationary cycle. That's really what the government and the Bank of Canada are trying to do. And banks are also playing a big role here, to defer debt payments and all kinds of other things. So, those are the policies that are being implemented. And it's not over yet. The government is spending two hundred and fifty billion dollars trying to lift the economy, help people. More is coming, I'm convinced. Clearly, some questions are being asked about the cost of all this. So, let's talk about debt.
[Onscreen Text: Expected Deficit to GDP Not Unprecedented:
Canada Federal Surplus/Deficit (% of GDP)
Source: Canada Department of Finance, CIBC]
[Onscreen Graph: A line graph showing the federal surplus and deficit as a percentage of GDP from 1961 to 2021 (forecasted)
]
Benjamin Tal: Clearly, as you can see from the next chart, the deficit is going to rise dramatically. We're talking about 8 percent of GDP, but it's not something that we haven't seen before. In the 1980s we've seen something similar. Now, people say, how are you going to pay for it? Of course, you're not paying for it. What you do is after the crisis is over, you make sure that your deficit is basically zero. And then GDP growth would be to two, two-and-a-half percent. So, GDP growth would be faster than debt accumulation. So, the debt to GDP ratio will go down over time. That’s the plan. And the good news is that Canada started this crisis in a very good fiscal position relative to other countries. So, we are now getting to where other countries were before the crisis and the debt is of course is going up. So, I think that we can manage it over time. But it is clear the governments would have to cut spending. And unfortunately, I think there will be some casualties. I think that the first casualty will be the environment. The other casualty, maybe will be education. I see more health-related spending. But clearly, we need to make sure the governments are maintaining zero deficits to be able to reduce the debt to income ratio.
[Onscreen Text: Core CPI Sees Little Response to Money Supply Swings:
M2 Money Supply and BoC Core Common Component Inflation. Source: Bank of Canada]
[Onscreen Graph: A line graph showing the M2 money supply and BoC core common component inflation from 1990 to 2020.)
Benjamin Tal: Another question that’s being asked, very quickly, is we are printing money. This is basically helicopter money. The Bank of Canada is printing money. We're talking about a quantitative easing, which is a very significant injection of money into the system. How inflationary is it? And if you look at the next chart, you can see that, yes, money supply would be rising. But money supply for many years now is not a good indicator of inflation. We have to remember that this money that is being now introduced to the economy is not new money. It's basically replacing lost income by corporations and, of course, by individuals. So, it's not really new money that is generating inflation. Money supply needs something else. It needs the money to move very quickly in the economy. And that's what's happening at this time. The Fed has been introducing quantitative easing for years, we haven't seen inflation. Same goes for Japan, the European Union. So, I'm not losing sleep over inflation at this point, despite the fact that the Bank of Canada is “printing money”.
[Onscreen Image: A still image of Benjamin Tal]
[Onscreen Text: Economic Update. Benjamin Tal, Managing Director & Deputy Chief Economist CIBC World Markets]
Benjamin Tal: So, all this means that yes, now, this quarter is the worst, ever, in our lifetime. There will be a rebound. The rebound will not be a V-shaped. But what governments are doing now is simply buying time. Because this crisis has an endgame. And this endgame is the vaccine. I will stop here. Back to you Ed.
[Onscreen Image: A still image of Ed Dodig]
[Onscreen Text: Steering You Through the Uncertainty. Ed Dodig, Managing Director & Head, CIBC Private Wealth Management & Wood Gundy]
Ed Dodig: Thank you, Ben. Now let me turn to Ian de Verteuil, Head of Portfolio Strategy at CIBC Capital Markets. Ian, given the economic prognosis we've just heard from Ben, I'm hoping you can drill down on the specific market outlook and investment strategy that makes sense in this environment.
[Onscreen Image: A still image of Ian de Verteuil]
[Onscreen Text: Investment Portfolio Strategy. Ian de Verteuil, Managing, Director & Head, Portfolio Strategy, CIBC World Markets]
Ian de Verteuil: Thank you Ed. The first thing we need to remember is that since the financial crisis, we have experienced a golden decade of investing. With strong equity and fixed income returns, and with modest volatility.
[Onscreen Text: Investment Strategy Will Get Tougher:
Since the Financial Crisis, we have experienced a decade of strong equity and fixed income returns with modest volatility
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Declining interest rates have driven returns in both asset classes
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Cash has been trash
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Low volatility has helped investors remain confident and fully invested]
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Ian de Verteuil: Specifically, over the last decade, the S&P 500 has compounded at about 11 percent. The TSX has lagged that because of falling oil prices. But even the 10 year bond, only that has produced 5 percent annual returns. To add to the positive performance of the past decade, we have had very low volatility. VIX-the common measure of volatility in stocks has averaged only 17 over the course of the past decade.
[Onscreen Image: A still image of Ian de Verteuil]
[Onscreen Text: Investment Portfolio Strategy. Ian de Verteuil, Managing, Director & Head, Portfolio Strategy, CIBC World Markets]
Ian de Verteuil: The strong returns and low volatility have largely been driven by declining interest rates, which have increased bond prices and also reduced the discount rate applied against equities, equity, cash flows and earnings. Cash has been trash. Low volatility has helped investors. All of us remain confident and fully invested. However, it is worth remembering what the previous decade looked like from 2000 to 2010. Over that period, the S&P 500 was virtually unchanged and VIX was about 30 percent higher, averaged 30 percent higher in that decade than in the past decade. This should be a stark reminder not to consider the past decade as typical. So, what will the future look like?
[Onscreen Text: The Future Will Likely Look Different:
We are likely to face more volatility and lower returns in the
next decade
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Interest rates provide some indications of potential returns and unless they fall further (unlikely) both bond and equity returns will moderate
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Higher risk due to substantial higher government funding needs, largely supported by buying Central Bank monetization
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Lower rates increase interest rate sensitivity
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Equity valuations are stretched]
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Ian de Verteuil: We believe we will face more volatility and lower returns in the next decade. For four reasons, first, the level of interest rates typically provides an indication of potential returns. And given that they are already low, we should assume modest returns from both bond and equity portfolios. Second, we have much higher risk due to substantially higher government funding needs, as Benjamin mentioned, largely supported by central bank activity. This says nothing about the reality that the government is far more involved in the corporate world than they have been in the past, and they will have to extricate themselves over the course of the next several years. The third point I would make is, as we have moved to lower rates, we actually become far more sensitive to move in interest rates. The last point is equity valuations are actually relatively stretched and quite a bit higher than their long-term average. So, what does this mean for asset mix?
[Onscreen Text: More Conservative Asset Mix Needed
Given the low returns on cash and fixed income, it will be tempting to accept more risk – Don’t
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Understanding individual risk tolerance will be important
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Despite the low yield, hold some cash and limit leverage
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As returns will be more modest, tax implications will be more important]
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Ian de Verteuil: Given the low returns on cash and fixed income, it will be tempting to accept much more risk. We do not believe investors will be well-served by making this decision. Remember, we expect more volatility. So, the first thing that needs to be done is individuals need to be very clear on their risk tolerance. We don't want to create a situation where volatility such as we have experienced over the course of the past month, cause individuals to move dramatically, to dramatically shift in asset portfolios. Despite the low yield, we think holding some cash and limiting leverage will be a good idea. Again, this will provide good flexibility in periods of volatility. As returns will also likely be more modest, understanding the tax ramifications of your investments will become more important. When returns of 10 percent plus compounded, tax decisions may be less relevant. That will be very different over the course of the next decade.
[Onscreen Image: A still image of Ian de Verteuil]
[Onscreen Text: Investment Portfolio Strategy. Ian de Verteuil, Managing, Director & Head, Portfolio Strategy, CIBC World Markets]
Ian de Verteuil: Now, one of the things that many investors are focused on is the issue of yield. How do I get income? I believe that chasing yield will be quite dangerous. As I mentioned previously, low rates have increased sensitivity to interest rates.
[Onscreen Text: Chasing Yield Will Be Dangerous:
High Yields Are Not Enough
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Most important question to ask, why am I offered higher yield?
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Solid business models will shine through
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Banks, Rails, Grocers and Telecoms remain attractive in Canada
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Bank dividends have not been cut since the WW2, and likely will not be cut despite the tragic complications from COVID-19
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Consider Bank DRIPs, particularly if a discount is offered]
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Ian de Verteuil: High yields are not enough. The most important question that investors should be asking themselves when offered investments with high yield, is why am I offered the higher yield?
[Onscreen Images: A man looks at computer monitors showing stock performances.]
Ian de Verteuil: Surely there must be higher risk associated with that. Now there are some solid opportunities for yield even within the Canadian Equity market.
[Onscreen Images: A person wearing glasses, with data images. Fingers on an electronic device, scrolling through graphs. A computer screen with numerical figures, followed by the sun shining on the side of a building. A time-lapse shot of a CIBC office tower at night. An urban railroad. Stocked shelves at a grocery store. A 5G cellular tower.]
Ian de Verteuil: We believe many of the highly concentrated business, such as banks, railroads, grocers and telecoms remain extremely attractive and actually offer solid yield. Over the course of the past couple of weeks, as banking systems and other parts of the world have been called upon to cut dividends, there have been many questions on Canadian bank dividends.
[Onscreen Text: Chasing Yield Will Be Dangerous:
High Yields Are Not Enough
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Most important question to ask, why am I offered higher yield?
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Solid business models will shine through
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Banks, Rails, Grocers and Telecoms remain attractive in Canada
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Bank dividends have not been cut since the WW2, and likely will not be cut despite the tragic complications from COVID-19
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Consider Bank DRIPs, particularly if a discount is offered]
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Ian de Verteuil: We do not expect Canadian banks to cut their dividends despite the tragic complications from COVID-19. I would say, first of all, Canadian banks, the big five, have not cut their dividends since the Second World War. They also operate with high structural levels of profitability, which allows them to absorb loan losses, the inevitable loan losses that come from the economic environment that Ben has mentioned. We also believe that banks may start offering dividend reinvestment programs with some discounts. This would be particularly attractive for investors who own bank shares but may not need all the cash immediately. It will allow you to effectively get more exposure to bank shares at a discount to the trading price.
[Onscreen Image: A still image of Ian de Verteuil]
[Onscreen Text: Investment Portfolio Strategy. Ian de Verteuil, Managing, Director & Head, Portfolio Strategy, CIBC World Markets]
Ian de Verteuil: So, in conclusion, we suggest very defensive posturing. It is extremely important that investors hold cash and limit leverage despite the very low levels of interest rates. Remember, we become more sensitive to interest rates as the level of rates fall. We also believe that investors need to be careful in chasing yield. With that, I'll turn it back over to Ed.
[Onscreen Image: A still image of Ed Dodig]
[Onscreen Text: Steering You Through the Uncertainty. Ed Dodig, Managing Director & Head, CIBC Private Wealth Management & Wood Gundy]
Ed Dodig: Thank you, Ian. Now, the federal government has quickly rolled out support for both individuals and business owners in the form of various financial relief measures. It can be tough to keep track of everything announced. So, we have asked our own Tax and Estate Planning expert Jamie Golombek to provide an overview of what's in place. Over to you, Jamie.
[Onscreen Image: A still image of Jamie Golombek]
[Onscreen Text: Federal Financial Relief. Jamie Golombek, Managing Director, Tax & Estate Planning, CIBC Private Wealth Management]
Jamie Golombek: Well, thanks very much Ed. So, there's a lot of things changing pretty much every day right now. So what I plan to do over the next few minutes is sort of summarize where we are right now in terms of the personal tax measures and the business measures that Canadians might be entitled to as a result of some of the government's COVID-19 financial response plan.
[Onscreen Text: Personal Tax Measures:
Measure | Benefit |
Canada Emergency Response Benefit | $2,000 per month |
Special GST payment | Approx. $400 (single) |
Increased CCB | $300 per child |
Tax filing/payment | Deferral |
Student loans | No interest/payments |
cibc.com/content/dam/personal_banking/advice_centre/tax-savings/covid-tax-en.pdf ]
Jamie Golombek: Let's begin with some of the personal tax measures. Probably the number one benefit that most Canadians are hearing about and that’s been written about and that’s really helped many, many people that have lost their job, is the a Canada Emergency Response Benefit. That's $2000 per month for up to four months, and that's available to many individuals who have lost their jobs. So, people who have stopped working, not earning income either employment income or self-employment income as a result of the COVID-19 pandemic.
[Onscreen Images: A woman with latex gloves on looks at her phone. A woman lies on her couch wearing a mask and looking at a tablet. A man in a mask looks out a window. A father helps his young daughter with homework. Two young girls work on homework at the kitchen table. An empty school hallway.]
Jamie Golombek: It applies to anyone who is not working or maybe staying home, someone who is sick or taking care of someone who is sick; even parents who are staying home without pay to care for children because the children are sick or because the schools and the daycares are closed. So, there are a couple of qualification rules right now. As it stands, you have to have had at least $5,000 dollars of employment or self-employment income in the prior year, either 2019 or the prior 12 months. A recent change says that in fact you are even permitted to have up to a $1000 of income per month and still qualify for the emergency benefit. All that detail is contained in our bulletin. In addition to that, a special GST HST credit payment has been made for the month of April. So, if you do qualify to receive GST and HST quarterly payments, you're going to get a special payment in the month of April, doubling the normal amount. That's approximately $400 dollars. It does vary based on income, based on marital status, and of course, based on the number of children you have.
[Onscreen Text: Personal Tax Measures:
Measure | Benefit |
Canada Emergency Response Benefit | $2,000 per month |
Special GST payment | Approx. $400 (single) |
Increased CCB | $300 per child |
Tax filing/payment | Deferral |
Student loans | No interest/payments |
cibc.com/content/dam/personal_banking/advice_centre/tax-savings/covid-tax-en.pdf ]
Jamie Golombek: Speaking of children, if you do have children and you're entitled to the Canada Child Benefit, there's an additional $300 per child that will be paid to everyone who's qualified for the Canada Child Benefit. Again, that's income teste;, that would be paid automatically as part of the May 2020 payment. There have been a number of extensions to the tax filing deadline. Of course, we all know that normally taxes are due on April 30th; self-employed due on June 15th. What they've done is they've extended the personal tax filing deadline till June the 1st for everyone. And self-employed still have to June 15th. And you actually now have until September 1st to pay any balance owing. And finally, for students with student loans or apprentices, with apprenticeship loans, what they've now done is deferred any payments or interest for up to six months, or for six months in total. So, I think that's very positive news on the personal side.
[Onscreen Text: 25% Decrease in 2020 RRIF Minimums:
Age | Regular | 2020 |
71 | 5.28% | 3.96% |
72 | 5.40% | 4.05% |
73 | 5.53% | 4.15% |
74 | 5.67% | 4.25% |
75 | 5.82% | 4.37% |
76 | 5.98% | 4.49% |
77 | 6.17% | 4.63% |
78 | 6.36% | 4.77% |
79 | 6.58% | 4.94% |
81 | 7.08% | 5.31% |
82 | 7.38% | 5.54% |
83 | 7.71% | 5.78% |
Age | Regular | 2020 |
84 | 8.08% | 6.06% |
85 | 8.51% | 6.38% |
86 | 8.99% | 6.74% |
87 | 9.55% | 7.16% |
88 | 10.21% | 7.66% |
89 | 10.99% | 8.24% |
90 | 11.92% | 8.94% |
91 | 13.06% | 9.80% |
92 | 14.49% | 10.87% |
93 | 16.34% | 12.26% |
94 | 18.79% | 14.09% |
95 & over | 20.00% | 15.00% |
cibc.com/content/dam/personal_banking/advice_centre/tax-savings/covid-rrif-en.pdf]
Jamie Golombek: One final measure, of course, that's worth mentioning is when it comes to RRIFs. So, RRIFs are the continuation of an RRSP at the age of 71, by the end of that year, you must convert your RRSP to a registered annuity or RRIF or pay full taxation of the amount. So, many Canadians have chosen the RRIF. There's a minimum required amount that you must take out every single year after the year that you convert and open up a RRIF. And typically, at age seventy-one, that starts at 5.28%. And as you can see on the chart goes all the way up to 20% at age 95.
[Onscreen Images: A finger scrolls through stock prices on a phone. A stock ticker screen.]
Jamie Golombek: What they have done in recognition of the financial markets that we've seen, obviously a lot of volatility and we've heard already with the financial markets and the decline in the markets, is that the concern that many seniors had was addressed because they're worried about taking money out of the RRIF, from a depressed RRIF that's gone down in value when they don't actually need that money to live on. And that would obviously reduce the amount of tax-free compounding inside of the RRIF. So, what they've done for one time, only for 2020, is they've reduced the minimum required amount that you must take out from the RRIF by 25 percent. So, this chart shows you the various new RRIF factors for 2020. And you could see that in every age level up until age 95, inclusive, they have reduced the factor by 25 percent. That will allow more money to remain in that RRIF and be available, there for retirement savings.
[Onscreen Image: A still image of Jamie Golombek]
[Onscreen Text: Federal Financial Relief. Jamie Golombek, Managing Director, Tax & Estate Planning, CIBC Private Wealth Management]
Jamie Golombek: Turning now to some of the measures for businesses. One of the biggest ones, of course, that we've read a lot about is the Canada Emergency Business Account. Now, what is that?
[Onscreen Text: Relief Measures for Businesses:
Measure | Benefit |
Canada Emergency Business Account | Up to $40K interest-free loan 25% forgiveness |
Tax filing & payment | Deferral |
Wage subsidies | 10% / 75% / 100% |
cibc.com/content/dam/personal_banking/advice_centre/tax-savings/covid-business-tax-en.pdf]
Jamie Golombek: That's effectively a loan. And the way that works is that you would go into your financial institution, so if you do your business banking, of course, with CIBC, you would you go online. We already have this set up online. And you can apply for an interest free loan of up to $40,000. And that's for businesses, that's for not for profits, and really helps covering some of the operating costs when revenues have been reduced. And in fact, they've just relaxed recently the rules for qualification. You have to be a corporation, and you have to have payroll. Now it's between 20,000 and 1.5 million dollars in 2019. And that's indicated on your T4 employment summary. So, that's a loan up to $40,000. 25 percent of that, would be forgiven assuming that you pay that loan back by December 31, 2022. If not, what we'll do at CIBC is convert that into a three-year term loan but with an interest rate of 5 percent.
Jamie Golombek: A couple of other measures for businesses, we should point out. First, of course, is an extension in various tax payment and filing deadlines for income taxes. Typically speaking, if the corporation had a filing due date anywhere after March the 18th, before June 1st, it's automatically extended to June 1st. In addition, certain payments have been extended. So, any income tax amounts that are owing after March 18th are also deferred till September 1st, just like we had with individuals, and personal tax payments.
Jamie Golombek: On the GST, HST side, on the remittance side, the CRA has also pushed back the deadline to remit the GST and HST that we've collected. Normally, it's due by the end of the month, following the reporting period. What they've now done is extended the GST and HST remittances until June 30th. So, a very, very positive news from a cash flow perspective.
[Onscreen Text: Wage Subsidy Programs:
Measure | Benefit |
Temporary Wage Subsidy | 10% subsidy |
Canada Emergency Wage Subsidy | 75% subsidy |
Canada Summer Jobs | 100% subsidy |
cibc.com/content/dam/personal_banking/advice_centre/tax-savings/covid-wage-subsidy-en.pdf]
Jamie Golombek: But perhaps the biggest thing for businesses, and I've left that, of course till the end, is wage subsidies. And there's really two wage subsidies and if you include students in the Canada student program, there's actually three. So, let me go over those on my final slide here. So, we have first of all, the temporary wage subsidy, this is the one that was originally announced. We call this the 10 percent subsidy. And effectively, that would apply to an eligible employer. And an eligible employer is typically an individual, sole proprietor, certain partnerships and some non-profits and charities and privately controlled Canadian corporations, CCPCs are generally smaller ones that effectively have below $15 million of taxable capital. And what you're able to do is claim a subsidy of $1375 per employee, up to $25,000 for employer. And this is actual direct cash that you can reduce your source deductions. So, as an employer, we're required to deduct and withhold amounts for income taxes. CPP, QPP in Quebec and EI. What you're now able to do under the temporary wage subsidy is simply reduce the amount of income taxes that you have to remit to the CRA on your next date by the amount of the subsidy. So, lots of information in our bulletin.
Jamie Golombek: Probably the biggest benefit, however, to many small businesses and large businesses as well, as the Canada Emergency Wage Subsidy. That's a 75 percent subsidy. And that's really, the key to that subsidy, again, available to those individuals, large and small corporations, many partnerships and charities, is that you have to show a revenue decline. They've changed the rules a little bit. But now the way it works effectively is you have to show that your monthly revenue has dropped by at least 15 percent for the month of March or 30 percent for the month of April and May of 2020. So, effectively you're going to be able to get a 75 percent wage subsidy. Now there are limits to that. And the limit is capped at a typical weekly amount, the weekly amount is a maximum benefit of $847 per week. But this is a substantial wage subsidy that will help many of our employers in Canada be able to retain those workers, whether or not they're actually working. And they've actually just enhanced that program. They're also going to provide for those employers a refund for various payroll contributions. So, as we know, there's an employer contribution for employment insurance CPP, QPP even the Quebec Parental Insurance Plan. And now what we're able to do is we're able to, as an employer, get a refund for 100 percent of your employer portion of the contribution to those plans. All those details are discussed in our accompanying bulletin on wage subsidies.
Jamie Golombek: And finally, to help students, we understand there's more relief coming for students any day now. But so far, what we know is a 100 percent wage subsidy. One hundred percent of any of the provincial or territorial minimum hourly wage for employees under the Canada Summer Jobs Program. And again, very, very helpful for students and we expect more relief coming for students.
[Onscreen Image: A still image of Jamie Golombek]
[Onscreen Text: Federal Financial Relief. Jamie Golombek, Managing Director, Tax & Estate Planning, CIBC Private Wealth Management]
Jamie Golombek: So, all of this stuff is changing on a day by day basis. All of our reports are online. They show the dates on them when you go on to the Internet and you'll see that we are continuing trying to update this and trying to stay on top of all the programs available for both individuals and businesses in Canada. Ed, back to you.
[Onscreen Image: A still image of Ed Dodig]
[Onscreen Text: Steering You Through the Uncertainty. Ed Dodig, Managing Director & Head, CIBC Private Wealth Management & Wood Gundy]
Ed Dodig: Thank you, Jamie. OK. We've heard a lot about the current situation. The outlook and measures in place to support Canadians. To wrap up, I'd like to turn to Lana Robinson, Executive Director of our Wealth Strategies Team, with some important reminders about the power of planning and some specific wealth strategies to consider during uncertain times. Lana.
[Onscreen Image: A still image of Lana Robinson,]
[Onscreen Text: The Power of Planning. Lana Robinson, Executive Director, Wealth Strategies Group, CIBC Private Wealth Management]
Lana Robinson: Thank you, Ed. The COVID-19 pandemic has caused many of us to reflect on our lives, our relationships and our plans. As we find ourselves reacting to unsettling news about the markets, our communities and in some cases, our families, it’s natural to feel like so much of what is happening is beyond our control. However, there are ways we can be proactive and focus on those areas we can control. This is the ideal time to revisit your wealth plan to understand the effect of market volatility, to adjust where necessary and perhaps to provide peace of mind that you're still on track to achieve your ambitions for yourself and your family. It's also important to review your estate planning documents to ensure they still reflect your wishes and intentions for transferring your wealth. We are here to help facilitate these conversations and to share strategies that may be appropriate for your situation.
[Onscreen Text: Proactive Planning in Volatile Markets:
You can’t control the markets but you can control your plan – be proactive, seek advice, recalibrate if needed.
Questions to consider with your advisor:
-
How have recent market events impacted my plan?
-
How can I plan beyond the immediate volatility to prepare for the future?
-
Are my cash flow requirements sustainable in the current environment? What options are available?
Strategies to consider in the current environment
-
Harvesting capital losses
-
Utilizing a prescribed rate loan
-
Estate freeze]
Lana Robinson: While we can't control the markets, we can control our reaction to them by revisiting our plans. Working together, we would seek to understand the impact of market volatility in the short term and to determine what strategies we should consider today that will benefit you when markets recover. Harvesting capital losses is a strategy whereby you seek to offset other capital gains. You would sell security in a loss position to realize the capital loss and purchase a similar security or alternatively, wait 30 days to repurchase the same issue.
Utilizing a prescribed rate loan is an effective strategy for splitting income with lower income earning family members. The prescribed loan rate is expected to drop from 2 percent to 1 percent next quarter. If you hold assets in a corporation, you may consider an estate freeze to essentially freeze the value and therefore the estate tax liability of assets held in a corporation which may be reduced in value due to the recent market volatility. If you've done an estate freeze in the past, there may be an opportunity to revisit the strategy to consider a re-freeze at the lower value, in anticipation that the values will increase when the market recovers. As always, you should seek the advice of your professional advisors.
[Onscreen Image: A still image of Lana Robinson,]
[Onscreen Text: The Power of Planning. Lana Robinson, Executive Director, Wealth Strategies Group, CIBC Private Wealth Management]
Lana Robinson: If you're experiencing short term cash flow constraints, CIBC has also implemented various mortgage and loan payment deferral programs. However, there may be additional strategies such as debt restructuring that may be worth considering. We are here to help. Estate planning is one of the most important elements of a wealth plan.
[Onscreen Images: A finger scrolls through a news story on a cell phone. A scrolling screen on the side of a building displays advice for social distancing.]
Lana Robinson: In recent months, world events have many of us concerned about whether our wills and powers of attorney still reflect our wishes.
[Onscreen Text: Review Your Estate Planning Documents:
Planning for the unthinkable is difficult but necessary
Essential questions to ask yourself when updating
or preparing your estate plan:
-
-
Who will I make decisions about my family, finances
and health if I fall sick? -
How do I want my assets (property, investments, insurance proceeds) to be distributed if I suddenly
pass away? -
How do I execute documents in the current
environment?
-
Estate planning documents to prioritize in the current environment:
-
Will
-
Financial Power of Attorney
-
Health Care Power
of Attorney/
Health Care Directive
Did you know?
Virtual witnessing now available for wills and POAs in ON and POAs in SK]
Lana Robinson: Consider, when was the last time you updated your documents Whether you were just now preparing your plan or updating your plan, we’ve identified some questions here for your consideration. If you are drafting and updating your estate documents, you should know that some of the obstacles created by social distancing and isolation are being addressed in certain jurisdictions. In Ontario, for example, the government has stepped in to allow for virtual witnessing of wills and powers of attorney during the pandemic. There are two caveats. First, the technology used must allow the participants to see, hear and speak with each other in real time. Second, at least one of the witnesses must be a lawyer or a paralegal. The Saskatchewan government has enacted similar emergency regulations to enable a lawyer to witness the execution of a power of attorney through video conferencing.
[Onscreen Image: A still image of Lana Robinson,]
[Onscreen Text: The Power of Planning. Lana Robinson, Executive Director, Wealth Strategies Group, CIBC Private Wealth Management]
Lana Robinson: What other considerations should we be thinking about? Well, as I said, estate planning is one of the most critical aspects of the wealth plan, but yet only half of Canadians have a will.
[Onscreen Text: Update Your Will:
Does my will reflect my wishes and recent life events?
Are the executors and trustees I have identified still appropriate?
Areas to review:
-
The beneficiaries
-
Executors and/or trustees
-
Appointment of guardians
for minor children -
The disposition of the
assets
Key considerations:
-
Do I want to provide for anyone beyond my immediate family? E.g. my community
-
How will I communicate the details of my will?
-
Do my executors know the scope and location
of my assets? -
Should I appoint a corporate executor and trustee to provide fiduciary oversight?]
Lana Robinson: Of those that do, they were often drafted upon getting married or having children, but have not been updated or reviewed in light of changes to their family financial situation or for tax and legal changes. So, ask yourself, do they still reflect your intentions? Some questions to consider: Are there people you want to provide for beyond your immediate family? If you've identified causes or charities to support, are they still active and do they still reflect your wishes? Are the executors and trustees you've identified still appropriate? If you have a complex estate, does it make sense to have a corporate executor or trustee as backup to a family member to provide fiduciary oversight over the management of your affairs? Have you had a discussion with your executors and trustees regarding your intentions? Are they aware of the scope and the location of your assets? Who will look after your children? Have there been any changes that would cause you to rethink that decision? And finally, does your will reflect your intentions with respect to the disposition of your assets? Perhaps you have an outright distribution to your children or have created a testamentary trust with a distribution to children at certain ages. Is this still appropriate for your situation today? Have you communicated your intentions to your family?
[Onscreen Image: A still image of Lana Robinson,]
[Onscreen Text: The Power of Planning. Lana Robinson, Executive Director, Wealth Strategies Group, CIBC Private Wealth Management]
Lana Robinson: The good news is we are living longer, but unfortunately that can often mean living with some degree of incapacity in our later years. The fact of the matter is that we are living very differently today than we were 20 or even 30 years ago. Often our families are spread across the country or even in different tax jurisdictions. This can create unintended consequences for your plan.
[Onscreen Text: Appoint Your Representatives:
Designate individual(s) to handle your affairs in the event of mental
or physical incapacity.
Type:
Financial Power of Attorney
or Power of Attorney for Property
Power of Attorney for Health Care/
Health Care Directive
Purpose:
For financial matters
To make medical decisions for you when you are no longer able to decide for yourself
Key considerations:
-
-
Review representatives – is this still consistent with your intent?
-
Have you communicated your health care wishes?
-
Do your representatives know that they’ve been appointed?
-
Age, location, willingness, objectivity, experience of representatives
-
Do they know the scope and location of your assets?]
-
Lana Robinson: In some ways, the appointment of representatives to act on your behalf for your financial affairs and your health care decisions are two of the most important decisions you'll make for your plan. We've identified some key considerations for you here, and I would highlight one area I think is particularly important, especially in this environment. Communicate your wishes, not just with those you've appointed, but with your whole family. Making your wishes clear to your loved ones well in advance can often ease the emotional burden that comes with making decisions for you during difficult times.
[Onscreen Text: Review and Update Regularly:
As your life changes so should your wealth plan...
Review regularly
-
Estate plan – every 3 to 5 years
-
Wealth plan – at least once a year
Review with life changes
-
Marriage, separation, or divorce
-
Birth or adoption of a child
-
Death of a spouse, child, or other beneficiary
-
Move to a different province
-
Change in financial circumstance
Times are challenging. Our team is with you every step of the way.
Lean on your advisor to help you find the right solutions.]
Lana Robinson: And finally, we would recommend you review your wealth plan with your advisor as part of your annual review and an in-depth review of your estate plan every three to five years. Consider that a change of location or circumstances of your executor, your attorney, your beneficiaries, the ages of your children, your marital status. All of these can have a material effect on your wealth plan. These are challenging times, but please know that we are all here to help. I would encourage you to reach out to your private banker or investment advisor to schedule a review of your wealth plan today. And with that, I'll hand it back to you Ed.
[Onscreen Image: A still image of Ed Dodig]
[Onscreen Text: Steering You Through the Uncertainty. Ed Dodig, Managing Director & Head, CIBC Private Wealth Management & Wood Gundy]
Ed Dodig: Thank you, Lana. Great points for all of us to consider and definitely food for thought in this environment. I hope you have all gained some perspective and important insights from all of our experts today. I want to close by reiterating that in a rapidly changing environment, access to advice and expertise is essential. Many of our clients have asked what they should do to protect themselves in the current market. As a general rule, the answer is that you should stick to the principles you've put in place with your advisor. The reason you have a trusted relationship with your financial expert is for times like this to help put market fluctuations and uncertainty in the context of your long-term ambitions. I want to thank you for joining us today and thank you for your continued partnership. We remain focused on continuing to earn that trusted relationship every day.
[Onscreen Text: If you have questions or need support, contact your Private Wealth advisor today. Thank you!]
Ed Dodig: I encourage you to reach out your advisor with any questions or concerns. We are here for you. It is our privilege. It is our purpose to support you and those you care about. I'm very proud of the way CIBC is responding to this health crisis at a time when our clients need us the most. And I'd like to leave you today with a short message from our CEO, Victor Dodig. Thank you.
[Onscreen Image: Victor Dodig stands at a table and looks at the camera. A laptop is open on the table facing the camera.
[Onscreen Text: Victor Dodig. President & CEO, CIBC]
Victor Dodig: In just a few short weeks, everything has changed. The health crisis is placing extreme pressure on Canadians and their finances. We know that many need help…and they need it now. So, we’re helping our clients by deferring mortgage payments, providing relief on credit cards and loans, putting in place special support for seniors and persons with disabilities, and increasing donations to charities that are helping those most at risk. We are also supporting the government programs for individuals and businesses, so we help get our country running again. We’ve also launched a special section on CIBC.com to help you get information on all the support measures available and how to access them quickly. Thank you…Stay well. And stay safe.
[Onscreen Text: CIBC (logo)
Helping you when you need it most
Cibc.com/covid19]
[Onscreen Text: Disclaimers: “CIBC Private Wealth Management” consists of services provided by CIBC and certain of its subsidiaries, through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC World Markets Inc. and ISI are both Members of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. CIBC Private Wealth Management services are available to qualified individuals. The CIBC logo and “CIBC Private Wealth Management” are registered trademarks of CIBC.
Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.
Insurance services are available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc.
The views expressed in this document are the personal views of the presenters and should not be taken as the views of CIBC Private Wealth Management. This document is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Certain information that we have provided to you may constitute “forward-looking” statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or achievements to be materially different than the results, performance or achievements expressed or implied in the forward-looking statements. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this document should consult with his or her advisor. All opinions and estimates expressed in this document are as of the date of publication unless otherwise indicated and are subject to change.]
Ben Tal Calgary Virtual Event November 2021
December 01, 2021
00:04:49.586 --> 00:04:52.606
Alright, I think we should probably get it get things.
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rolling here. So good afternoon.
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everyone. It is afternoon now. I my name is Nathan Thornton the branch.
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manager CIBC Wood Gundy and on behalf of.
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all of our advisors and their teams here in Calgary.
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and Lethbridge and in Medicine Hat welcome, it is great.
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to have you here. I've been certainly a goal to have.
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this in person and I'd hope we'd be able to do so by now, but.
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the weird world we're living in has conspired to make.
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us rely on the virtual connections.
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Once again, so and we'll talk a little bit more.
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our guest. We'll talk a little bit more about the weird world that.
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we are living in a little more detail, little bit.
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of housekeeping though before we start. So first off this presentation.
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is being recorded just so you'll notice.
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That chat function has been disabled on this for this.
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presentation, but the Q&A function at the top.
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toolbar will be will be active. So if.
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you have any questions throughout the presentation, type those in.
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I will be forwarding those to bend towards the end of the presentation.
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and we'll get to as many of them as we possibly can.
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Uhm with that I'm going to turn it over to our guest speaker.
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so Mr. Towel, frequent contributor to regional national media.
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Over 20 years of experience in the private sector. Advising clients.
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industry leaders, corporate boards, trade associations, governments.
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He is our deputy chief economist and.
00:06:12.056 --> 00:06:15.746
it is my pleasure to welcome Benjamin Tal van over.
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to you. Thank you very much and listen. I've about that 30.
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minutes to tell you everything I know about the situation that.
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29 minutes, too much because quite frankly.
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Nobody has a clue. It's all about the virus. It's all about the.
00:06:28.626 --> 00:06:32.006
tug of war between the virus and the economy and.
00:06:32.006 --> 00:06:35.626
the vaccines. So we'll talk about this tug of war at what it means.
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We also talk about the elephant in the room.
00:06:39.066 --> 00:06:42.446
and that's of course inflation. And how much sleep we should lose.
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over inflation will talk about interest rates.
00:06:45.526 --> 00:06:49.086
how they're going to react to rising inflation, and if there.
00:06:49.086 --> 00:06:52.216
is a need to do so at all. We talk about government.
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debt. Who is going to pay down that debt, and what it means?
00:06:55.306 --> 00:06:58.186
in terms of future spending and maybe taxes.
00:06:58.446 --> 00:07:02.106
And we'll talk about some long term implications to what extent.
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kovid is an event.
00:07:04.196 --> 00:07:07.286
Ola condition, but the first I would like to start.
00:07:07.286 --> 00:07:10.976
with the tug of war between you.
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virus and the economy and the WHO is now.
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very concerned about one thing.
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What they are going to do when they run out of Greek?
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letters to name the variance seriously?
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that was in their press release.
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So there thinking about variance coming which.
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means that it's not over by any stretch of the imagination.
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So we know the delta has been a very.
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vicious variant, but the doctor.
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in one of the hospitals told me that actually it's a good thing.
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Why? Because the next variant will have to be like a super.
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variant to outdo Covid Delta.
00:07:49.446 --> 00:07:52.726
which means that we are learning.
00:07:52.726 --> 00:07:56.546
how to function with this virus.
00:07:56.546 --> 00:07:56.546
00:07:57.126 --> 00:07:59.016
And soon enough we hope.
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It will turn from a pandemic to endemic and they hope it will happen.
00:08:03.306 --> 00:08:07.006
at one point in 2022 and as a society.
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we are going to learn how to cope with this.
00:08:10.406 --> 00:08:13.826
virus and therefore economic activity will recover.
00:08:13.826 --> 00:08:17.606
and we'll talk about exactly how in a few minutes, so that said.
00:08:17.606 --> 00:08:20.386
this tug of war between the virus.
00:08:21.586 --> 00:08:24.636
And the economy. Now, what it?
00:08:24.636 --> 00:08:27.896
eans? In practical terms, we can see in the 1st.
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t chart. So at any point.
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in time, if you go to the first chart, this one.
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There are two factors impacting economic activity. One.
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is the fear factor, namely the restaurant.
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is open. Nobody showing up the other.
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is the availability factor, namely how much you.
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open. Look at this chart. This is actually from the first wave.
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Some states in the US were totally open some.
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states were totally closed, we followed.
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consumer spending in those states and.
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you can see that you cannot distinguish between the two.
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Which means.
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Dad, the fear factor was dominating.
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and the fact that it was open was irrelevant clearly.
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the fear factor has been diminishing and diminishing with the vaccine.
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and all the ammunition we have now, but.
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it's not disappearing, and it's reasonable to assume that.
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with winter approaching.
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The fear factor will reappear. It will not dominate.
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but it will be in the background, something.
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to take into account and the next chart is telling you.
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that it's already starting to happen if.
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you look at the next chart.
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You can see what I mean by that.
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The high touch activity.
00:09:50.396 --> 00:09:53.406
He's starting to level off, which means that yes.
00:09:53.406 --> 00:09:56.476
we are this nice rebound. But now people are starting to think.
00:09:56.476 --> 00:09:59.676
twice before they go to restaurant, especially with.
00:09:59.676 --> 00:10:02.706
the winter approaching. So this level of activity.
00:10:02.706 --> 00:10:05.926
is kind of stabilizing, suggesting that slowly.
00:10:05.926 --> 00:10:09.026
the fear factor is entering our psyche.
00:10:09.026 --> 00:10:12.086
again, not dominating, but it's there something to.
00:10:12.086 --> 00:10:15.166
take into account now. Why is why all this?
00:10:15.166 --> 00:10:18.286
is important? Let's go to the next chart and.
00:10:18.286 --> 00:10:21.376
we know one thing that you still have.
00:10:21.376 --> 00:10:21.376
00:10:21.436 --> 00:10:24.466
A lot of time before global economy will be.
00:10:24.466 --> 00:10:28.896
ready for life after the BIOS we.
00:10:28.896 --> 00:10:32.276
know that it will take about nine months.
00:10:32.276 --> 00:10:33.486
to vaccinate.
00:10:33.546 --> 00:10:36.996
The global economy when?
00:10:36.996 --> 00:10:40.146
you have two shots. Now if you need 3A booster it.
00:10:40.146 --> 00:10:43.156
will take like 16 months, so we know that it will.
00:10:43.156 --> 00:10:46.406
take a long time. However, you can see from the chart to the right.
00:10:46.406 --> 00:10:49.676
that what counts now is really not the number.
00:10:49.676 --> 00:10:52.506
of cases, but rather.
00:10:53.806 --> 00:10:54.676
The.
00:10:55.986 --> 00:10:58.626
Situation in which people are dying.
00:10:59.606 --> 00:11:02.726
The level of hospitalization, so what?
00:11:02.726 --> 00:11:05.766
counts now in terms of government policy is not the number of.
00:11:05.766 --> 00:11:09.406
cases, but really the situation in the healthcare system let's.
00:11:09.406 --> 00:11:12.506
go to the next chart and explore this and the next chart.
00:11:12.506 --> 00:11:15.986
is very, very interesting. Look at this chart this.
00:11:15.986 --> 00:11:19.306
is hospitalization rate per capita.
00:11:19.306 --> 00:11:20.646
Look at that.
00:11:21.646 --> 00:11:24.676
Canada, the lowest. This is during the first this sorry.
00:11:24.676 --> 00:11:26.256
this is during the second wave.
00:11:27.076 --> 00:11:27.856
Look at Canada.
00:11:28.656 --> 00:11:29.406
The last
00:11:30.136 --> 00:11:33.126
3/4 times slower than the UK, the US.
00:11:33.716 --> 00:11:37.206
Is it a good thing or a bad thing but?
00:11:37.206 --> 00:11:40.556
it's not so good, why? Because if you go back and.
00:11:40.556 --> 00:11:43.636
look at the headlines in the dark days of the.
00:11:43.636 --> 00:11:47.406
second wave, the early early 2021, the.
00:11:47.406 --> 00:11:51.516
health care system in Canada was at a breaking point.
00:11:51.516 --> 00:11:51.516
00:11:53.446 --> 00:11:56.606
And we will, at the lowest level.
00:11:56.606 --> 00:11:57.356
of capacity.
00:11:58.416 --> 00:12:02.096
So we reached capacity much faster than.
00:12:02.096 --> 00:12:03.666
any other country.
00:12:05.146 --> 00:12:08.066
Why, let's go to the next chart and see why.
00:12:08.746 --> 00:12:09.426
Look at that.
00:12:10.266 --> 00:12:13.756
Spare capacity of acute beds per capita in Canada.
00:12:13.756 --> 00:12:14.816
is the lowest.
00:12:15.776 --> 00:12:18.956
The lowest in the LCD with the exception.
00:12:18.956 --> 00:12:19.816
of Mexico.
00:12:21.866 --> 00:12:25.946
We usually operate at 95% while.
00:12:25.946 --> 00:12:28.486
you supposed to operate at about 85%.
00:12:29.776 --> 00:12:32.706
So the minute you have covered you reach capacity in no time.
00:12:33.766 --> 00:12:36.916
If this is not a wake up call to inject.
00:12:36.916 --> 00:12:40.176
more money into the health care system, I don't know what it is.
00:12:40.176 --> 00:12:40.176
00:12:41.366 --> 00:12:44.526
Because it's clearly a situation in which.
00:12:44.526 --> 00:12:46.236
what other countries?
00:12:46.996 --> 00:12:50.216
Consider to be acceptable. We consider to.
00:12:50.216 --> 00:12:53.236
be pick and we reached that peak very very quickly and.
00:12:53.236 --> 00:12:57.076
remember what is impacting government.
00:12:57.076 --> 00:13:00.376
policies in terms of shutting down the economy is.
00:13:00.376 --> 00:13:03.536
not the number of cases, it's the situation in.
00:13:03.536 --> 00:13:06.636
the health care system. And if you reach peak much.
00:13:06.636 --> 00:13:10.036
quicker than any other country, it means.
00:13:10.036 --> 00:13:13.716
that you also start reversing.
00:13:13.716 --> 00:13:16.276
policy faster and in a more aggressive way.
00:13:17.336 --> 00:13:20.426
Let's look at the implications of that.
00:13:20.426 --> 00:13:21.506
That's the next chart.
00:13:22.516 --> 00:13:23.556
And you can see.
00:13:24.476 --> 00:13:25.006
That
00:13:25.746 --> 00:13:28.786
This is basically the conflict that.
00:13:28.786 --> 00:13:32.266
is defining this crisis, the conflict.
00:13:32.266 --> 00:13:34.666
between lives and livelihood.
00:13:35.376 --> 00:13:38.036
For a given level of hospitalization.
00:13:38.666 --> 00:13:42.726
The Canadian economy was much more restricted.
00:13:42.726 --> 00:13:44.446
than the US economy.
00:13:45.886 --> 00:13:49.536
And part of it has to do with the fact that we had to implement.
00:13:49.536 --> 00:13:53.216
more severe restrictions due to the increased.
00:13:53.216 --> 00:13:56.596
level of hospitalization rates and.
00:13:56.596 --> 00:13:58.316
the low level of capacity.
00:14:00.816 --> 00:14:04.026
So this has clear economic implications and.
00:14:04.026 --> 00:14:07.426
if you go to the next chart, you can see the.
00:14:07.426 --> 00:14:07.426
00:14:08.096 --> 00:14:08.776
Results.
00:14:09.386 --> 00:14:12.566
Since the beginning of Kovid, the US economy was able.
00:14:12.566 --> 00:14:15.976
to outperform Canada economically.
00:14:15.976 --> 00:14:19.006
speaking, a lot of it had to do with the fact that the US.
00:14:19.006 --> 00:14:23.206
was much more open. Now there are some positives and negatives, but economically speaking.
00:14:23.206 --> 00:14:26.346
that was a negative. There is no question about it so.
00:14:26.346 --> 00:14:27.666
from the beginning of Kovid.
00:14:28.576 --> 00:14:32.246
We have to run faster to stay in the same place when you compare.
00:14:32.246 --> 00:14:35.766
the situation to the USD are outperforming.
00:14:35.766 --> 00:14:38.806
us in terms of economic growth but.
00:14:38.806 --> 00:14:42.086
if you go to the next chart you can see something very interesting.
00:14:42.086 --> 00:14:45.906
Although the US is doing better from a GDP perspective.
00:14:45.906 --> 00:14:49.246
they are not doing better from a labor market.
00:14:49.246 --> 00:14:52.286
perspective. In fact we are doing better so we.
00:14:52.286 --> 00:14:55.716
have to explore this and see what makes sense and what doesn't.
00:14:55.716 --> 00:14:58.466
When it comes to the Canadian labour market.
00:14:58.606 --> 00:15:01.836
So let's go very quickly to the next chart and see.
00:15:01.836 --> 00:15:04.896
what makes sense and we can see something very interesting.
00:15:04.896 --> 00:15:04.896
00:15:06.986 --> 00:15:08.556
And let's go, where are we?
00:15:09.766 --> 00:15:10.826
Let's go to.
00:15:11.866 --> 00:15:12.766
Yeah next month.
00:15:15.886 --> 00:15:18.956
And we can see something very interesting first of all.
00:15:18.956 --> 00:15:22.416
we have a situation in which something.
00:15:22.416 --> 00:15:25.836
that is very relevant to you in Alberta is that despite.
00:15:25.836 --> 00:15:26.436
the fact.
00:15:27.276 --> 00:15:30.296
That we are the situation in which Canada was.
00:15:30.296 --> 00:15:33.766
able to close the employment gap relative to 2019.
00:15:33.766 --> 00:15:33.766
00:15:34.766 --> 00:15:38.036
We haven't seen a significant increase in hiring in oil and.
00:15:38.036 --> 00:15:41.196
gas. For example, in mining support Mom for.
00:15:41.196 --> 00:15:43.856
mining, namely, despite the.
00:15:44.956 --> 00:15:48.586
Mega Boom in the oil market we.
00:15:48.586 --> 00:15:51.876
haven't seen hiring happening in Alberta.
00:15:51.876 --> 00:15:51.876
00:15:52.586 --> 00:15:55.646
In the oil and gas sector the.
00:15:55.646 --> 00:15:59.006
question is why? And the answer is.
00:15:59.006 --> 00:16:01.236
maybe because of the fact that many.
00:16:01.766 --> 00:16:05.316
The CEO's of oil companies are saying listen this.
00:16:05.316 --> 00:16:08.816
boom, maybe it will not last for too long, we know.
00:16:08.816 --> 00:16:11.976
that energy is going to be relatively smaller.
00:16:12.556 --> 00:16:15.736
Segment of the Canadian economy. We are not investing.
00:16:15.736 --> 00:16:19.056
dramatically now to increase capacity, so we haven't seen.
00:16:19.056 --> 00:16:22.196
any significant increase in investment, and we haven't seen.
00:16:22.196 --> 00:16:25.296
any significant increase in hiring. And that's the reason.
00:16:25.296 --> 00:16:28.516
why valuation of oil companies.
00:16:28.516 --> 00:16:31.596
are rising because the price is rising. Their cost structure is.
00:16:31.596 --> 00:16:34.716
not rising in any significant way, so their profit is rising.
00:16:34.716 --> 00:16:37.876
dramatically, usually in this kind of environment when.
00:16:37.876 --> 00:16:41.476
oil prices go up, you see a significant increase in investment.
00:16:41.476 --> 00:16:41.476
00:16:42.576 --> 00:16:45.626
Among oil companies and hiring among.
00:16:45.626 --> 00:16:48.686
oil companies, that's not the situation now, which is very.
00:16:48.686 --> 00:16:52.106
interesting, reflecting maybe some change.
00:16:52.106 --> 00:16:55.386
in the way many companies are thinking about the long.
00:16:55.386 --> 00:16:58.566
term prospect of increasing capacity so.
00:16:58.566 --> 00:17:01.916
what we are seeing now is that maybe the.
00:17:01.916 --> 00:17:05.366
oil companies are looking at a situation.
00:17:05.366 --> 00:17:08.606
in which they will remain small, productive, efficient.
00:17:08.606 --> 00:17:08.606
00:17:09.396 --> 00:17:12.706
But will not increase capacity in any significant way, let's.
00:17:12.706 --> 00:17:15.936
go to the next chart and see the story of this recession.
00:17:15.936 --> 00:17:19.016
and that's the asymmetrical nature of this.
00:17:19.016 --> 00:17:22.316
crisis. Look at this. All the jobs created.
00:17:22.316 --> 00:17:25.616
Join Greek. This crisis were public sector jobs.
00:17:25.616 --> 00:17:25.616
00:17:26.246 --> 00:17:29.466
Private sector basically back to 2019.
00:17:29.466 --> 00:17:31.566
self-employed down.
00:17:32.886 --> 00:17:36.226
And the question is why self employment is so down and the answer is.
00:17:36.226 --> 00:17:39.346
that maybe if you pay people to stay home they will stay home.
00:17:39.346 --> 00:17:42.466
So the big question is to what extent we are going.
00:17:42.466 --> 00:17:45.766
to see some increase in self employment activity.
00:17:45.766 --> 00:17:49.186
The minute the government stops paying you and we know that this.
00:17:49.186 --> 00:17:52.446
basically happening now. So let's see how this will.
00:17:52.446 --> 00:17:55.486
develop. But this is very interesting. Basically if you.
00:17:55.486 --> 00:17:58.736
pay people to stay home they will stay home and that's exactly.
00:17:58.736 --> 00:18:00.966
what we have seen in Canada and to an extent.
00:18:01.816 --> 00:18:04.846
In the US, but the more interesting story is the.
00:18:04.846 --> 00:18:07.586
next chunk, and that's basically.
00:18:08.226 --> 00:18:11.596
The asymmetrical nature of this recession.
00:18:11.596 --> 00:18:14.756
when it comes to job creation by wage.
00:18:14.756 --> 00:18:18.416
Basically all the jobs that were lost early in the crisis.
00:18:18.416 --> 00:18:21.646
where low paying jobs all the jobs.
00:18:21.646 --> 00:18:24.736
that were gained wear high paying jobs. So if there.
00:18:24.736 --> 00:18:28.416
was any income gap in Canada before the crisis now.
00:18:28.416 --> 00:18:31.996
this income gap is actually wider and.
00:18:31.996 --> 00:18:35.176
this has major implications, for example the.
00:18:35.176 --> 00:18:36.336
housing market.
00:18:37.516 --> 00:18:40.796
The question is why during a recession this.
00:18:40.796 --> 00:18:44.016
housing market even in Alberta has been booming?
00:18:44.016 --> 00:18:44.016
00:18:46.356 --> 00:18:47.546
And the question is.
00:18:48.306 --> 00:18:51.906
How can you justify this kind of activity and?
00:18:51.906 --> 00:18:52.806
the answer is?
00:18:53.996 --> 00:18:54.686
In front of you.
00:18:56.166 --> 00:18:59.286
Basically, the S symmetrical nature of.
00:18:59.286 --> 00:19:02.326
that recession meant that most of the.
00:19:02.326 --> 00:19:05.806
people that lost their jobs were actually young people renters.
00:19:05.806 --> 00:19:08.836
not homebuyers, homebuyers, most.
00:19:08.836 --> 00:19:11.926
of them did not feel the pain financially.
00:19:11.926 --> 00:19:15.266
This crisis when it comes to the damage was.
00:19:15.266 --> 00:19:18.346
very, very deep, but also very narrow, which.
00:19:18.346 --> 00:19:21.176
means that if you were impacted by the crisis, you failed a pen.
00:19:22.246 --> 00:19:25.636
If you were a restaurant and division the hotel.
00:19:25.636 --> 00:19:27.336
but most people did not.
00:19:28.426 --> 00:19:29.746
They kept their jobs.
00:19:30.966 --> 00:19:32.086
There were zooming.
00:19:32.956 --> 00:19:35.976
Their income actually went up, so if you think about.
00:19:35.976 --> 00:19:39.316
it for a second, a very large segment of the population.
00:19:39.316 --> 00:19:39.316
00:19:41.316 --> 00:19:44.116
Did not feel financially this crisis.
00:19:45.806 --> 00:19:47.566
We have never seen anything like that.
00:19:48.386 --> 00:19:50.506
Before in any other recession.
00:19:51.146 --> 00:19:54.766
Which means if you think about it, what it really means is.
00:19:54.766 --> 00:19:57.946
that home buyers and potential home buyers.
00:19:57.946 --> 00:20:01.706
got the benefit of recession visa.
00:20:01.706 --> 00:20:04.826
vie extremely low interest rates without.
00:20:04.826 --> 00:20:08.326
the cost of a recession visa via broadly.
00:20:08.326 --> 00:20:10.946
based increase in the unemployment rate.
00:20:12.796 --> 00:20:15.886
That's the secret behind the.
00:20:15.886 --> 00:20:17.226
housing market.
00:20:17.826 --> 00:20:21.106
During this crisis, the asymmetrical nature of.
00:20:21.106 --> 00:20:24.506
the crisis. Now let's go to the next chart.
00:20:24.506 --> 00:20:24.506
00:20:25.466 --> 00:20:28.646
And you see another interesting story in the US.
00:20:28.646 --> 00:20:28.646
00:20:30.056 --> 00:20:33.176
We have seen a significant decline in the participation.
00:20:33.176 --> 00:20:36.716
rate among older people.
00:20:36.716 --> 00:20:39.996
55 and over, and I suggest that if.
00:20:39.996 --> 00:20:43.266
those people 55 and over decided to exit.
00:20:43.266 --> 00:20:43.266
00:20:44.206 --> 00:20:45.246
The labor market.
00:20:46.436 --> 00:20:48.436
During COVID, they're not coming back.
00:20:49.376 --> 00:20:51.476
In Canada we haven't seen it yet.
00:20:52.166 --> 00:20:55.686
So that's one big, different different between.
00:20:55.686 --> 00:20:56.726
Canada and the US.
00:20:57.986 --> 00:21:01.786
The other is the quit rate. You probably.
00:21:01.786 --> 00:21:04.686
eard about the great resignation.
00:21:05.566 --> 00:21:08.856
Trend and it is true in the US because.
00:21:08.856 --> 00:21:11.906
of the lack of labor and.
00:21:11.906 --> 00:21:13.246
the increase in wages.
00:21:14.126 --> 00:21:17.606
Labor has more power, so people are quitting like.
00:21:17.606 --> 00:21:18.486
there is no tomorrow.
00:21:19.266 --> 00:21:20.546
Looking for something else.
00:21:21.186 --> 00:21:24.266
In Canada, the quit rate remained.
00:21:24.266 --> 00:21:27.406
the same. The difference, however, that in Canada in.
00:21:27.406 --> 00:21:30.426
the latest survey, a record high.
00:21:30.426 --> 00:21:30.426
00:21:31.246 --> 00:21:33.746
Number of people said that they were thinking about.
00:21:34.796 --> 00:21:37.996
Retirement, it'll be about quitting. So in the USD.
00:21:37.996 --> 00:21:41.156
actually doing it in Canada as usual we are.
00:21:41.156 --> 00:21:42.336
just thinking about it.
00:21:43.766 --> 00:21:47.206
But I think that that's something that is coming the labor market.
00:21:47.206 --> 00:21:50.286
is very, very tight and without a significant increase.
00:21:50.286 --> 00:21:53.466
in wages, people in Canada also will start quitting.
00:21:53.466 --> 00:21:56.926
something to think about. So when you talk about wages.
00:21:56.926 --> 00:22:00.026
when you talk about people quitting because the labor labor, market.
00:22:00.026 --> 00:22:00.866
s so strong.
00:22:02.446 --> 00:22:03.816
You have to ask.
00:22:04.506 --> 00:22:07.996
The most important question at this point, inflation, how?
00:22:07.996 --> 00:22:11.116
uch sleep should we lose over inflation?
00:22:11.116 --> 00:22:11.116
00:22:11.766 --> 00:22:14.766
Now granted, if you are under the age of 30.
00:22:15.796 --> 00:22:17.856
You don't know how to spell the word inflation.
00:22:18.836 --> 00:22:21.916
But it does exist, so let's go to the next chart and start.
00:22:21.916 --> 00:22:25.506
exploring. While the next chart is telling us.
00:22:25.506 --> 00:22:25.506
00:22:26.316 --> 00:22:29.396
That although economic growth in Canada in.
00:22:29.396 --> 00:22:32.696
real terms adjusted for inflation was negative.
00:22:32.696 --> 00:22:34.736
If you look at nominal.
00:22:35.926 --> 00:22:36.486
Growth.
00:22:37.436 --> 00:22:40.036
It's up by 8%. It's all inflation.
00:22:42.926 --> 00:22:47.376
And given the fact that government revenue are based on.
00:22:47.376 --> 00:22:47.376
00:22:50.516 --> 00:22:51.616
Nominal GDP.
00:22:52.436 --> 00:22:54.736
Trudeau is much richer.
00:22:55.446 --> 00:22:56.746
Than he thinks.
00:22:58.246 --> 00:22:59.086
Every.
00:23:01.056 --> 00:23:01.636
Point
00:23:02.246 --> 00:23:05.456
Increase in GDP nominal GDP is an extra.
00:23:05.456 --> 00:23:08.436
$4 billion of revenues.
00:23:09.506 --> 00:23:12.546
And that's exactly the reason why the budget deficit will.
00:23:12.546 --> 00:23:15.946
be smaller when they update the numbers.
00:23:15.946 --> 00:23:19.426
And that's why in places like Ontario, you've seen a situation in which.
00:23:19.426 --> 00:23:22.456
the budget deficit was basically half of.
00:23:22.456 --> 00:23:23.166
what it used to be.
00:23:23.976 --> 00:23:27.036
This huge increase in nominal GDP is actually a very.
00:23:27.036 --> 00:23:30.156
good thing for governments, but beyond that.
00:23:32.156 --> 00:23:35.226
Inflation our sustainable our real.
00:23:35.226 --> 00:23:36.176
or it's all noise?
00:23:36.966 --> 00:23:40.236
Let me start by telling you one thing and this is very important.
00:23:40.236 --> 00:23:41.326
nobody.
00:23:42.206 --> 00:23:45.316
Nobody knows where inflation.
00:23:45.316 --> 00:23:46.506
will be six months from now.
00:23:48.946 --> 00:23:52.016
And when I say nobody, I include the Bank of Canada and the.
00:23:52.016 --> 00:23:55.226
Fed in that nobody. We're all pretending, but nobody.
00:23:55.226 --> 00:23:58.356
knows. So we have to invest and.
00:23:58.356 --> 00:24:02.196
think about investment given this environment, however.
00:24:02.196 --> 00:24:05.316
we must make some educated guesses.
00:24:05.316 --> 00:24:08.566
about what makes sense and what doesn't when it comes to inflation.
00:24:08.566 --> 00:24:11.896
because it's too important. So let's start and see what makes sense.
00:24:11.896 --> 00:24:13.516
Let's go to the next chart.
00:24:14.226 --> 00:24:17.436
And the next chart is telling you that basically one.
00:24:17.436 --> 00:24:21.056
of current inflation is.
00:24:21.056 --> 00:24:24.256
basically kovid. It's all covid sensitive.
00:24:24.256 --> 00:24:27.456
goods and services. Why? Because people have been sitting.
00:24:27.456 --> 00:24:30.716
on this mountain of cash. We are starting to open.
00:24:30.716 --> 00:24:34.116
up. Services are opening up, people are starting to spend.
00:24:34.116 --> 00:24:37.196
and spend like there is no tomorrow and we.
00:24:37.196 --> 00:24:40.416
are sitting on more than $200 billion.
00:24:40.416 --> 00:24:43.566
of excess cash looking for direction. There is so.
00:24:43.566 --> 00:24:45.436
much pent up demand and I remember.
00:24:45.616 --> 00:24:48.866
Back then, when I had a conversation with the Finance minister.
00:24:48.866 --> 00:24:52.046
she asked how can we convince people?
00:24:52.046 --> 00:24:55.066
to spend that extra money that they're sitting on?
00:24:55.066 --> 00:24:58.076
And I said provide the vaccine and get.
00:24:58.076 --> 00:25:01.406
out of the way. They don't need any motivation.
00:25:01.406 --> 00:25:04.516
There are motivated enough. What they need is the green light, so.
00:25:04.516 --> 00:25:07.596
we got a semi green light over the past few months and.
00:25:07.596 --> 00:25:10.966
that's why you see this pent up demand rising and what's interesting.
00:25:10.966 --> 00:25:10.966
00:25:12.096 --> 00:25:14.836
Is that companies that sell us all those stuff?
00:25:15.666 --> 00:25:18.706
They are able to transfer the cost to the consumer.
00:25:18.706 --> 00:25:18.706
00:25:19.406 --> 00:25:22.226
Because this consumer is willing to pay.
00:25:23.156 --> 00:25:26.206
The price is activity of the consumer is much lower than it used to be.
00:25:26.206 --> 00:25:29.226
because we are sitting on this mountain of cash and that's why if you look.
00:25:29.226 --> 00:25:32.346
at profit margins in the US, there are.
00:25:32.346 --> 00:25:36.006
back to normal because companies are able to transfer.
00:25:36.006 --> 00:25:39.266
the extra cost to the consumer so that's important.
00:25:39.266 --> 00:25:42.846
The next chart is the most important story.
00:25:42.846 --> 00:25:45.866
and that's wages as I.
00:25:45.866 --> 00:25:47.906
indicated the.
00:25:49.486 --> 00:25:50.426
Vacancy rate.
00:25:51.076 --> 00:25:54.176
In the US and Canada, when it comes to label is.
00:25:54.176 --> 00:25:57.656
at a record high. The minute people need people.
00:25:57.656 --> 00:26:00.896
they pay more and that's starting to happen.
00:26:00.896 --> 00:26:04.736
You can see it in restaurants. You can see it in hospitality.
00:26:04.736 --> 00:26:07.536
You can see it in other sectors that need people.
00:26:08.266 --> 00:26:11.516
And some people that have been getting money from the government to sit home.
00:26:11.516 --> 00:26:14.676
I've been watching from the window through the window.
00:26:14.676 --> 00:26:18.076
and see their future wage rising.
00:26:18.076 --> 00:26:19.516
while they were waiting at home.
00:26:21.166 --> 00:26:24.196
And this is still happening. Try to find somebody in a.
00:26:24.196 --> 00:26:25.876
restaurant walking. It's very difficult.
00:26:27.056 --> 00:26:30.436
Companies small businesses are telling us they are unable to find people.
00:26:30.436 --> 00:26:33.476
everywhere is people are hiring wages.
00:26:33.476 --> 00:26:34.016
are rising.
00:26:35.056 --> 00:26:38.106
The question is our sustainability is and I believe that.
00:26:38.106 --> 00:26:40.066
this is actually relatively sustainable.
00:26:40.996 --> 00:26:44.376
Because we started this crisis with a significant shortage of labor.
00:26:44.376 --> 00:26:47.806
and now this crisis exposed out shortage.
00:26:47.806 --> 00:26:50.826
and if other people will be exiting the.
00:26:50.826 --> 00:26:54.236
labor market dot shortage will be even worse. So that's something.
00:26:54.236 --> 00:26:57.486
that we have to take into account. The fact that people are willing to quit.
00:26:57.486 --> 00:27:00.886
to get a new job means that the bargaining power now is with labor.
00:27:00.886 --> 00:27:04.296
and that's inflationary. One factor that is actually.
00:27:04.296 --> 00:27:07.356
benefiting Canada relative to the US when it comes to the.
00:27:07.356 --> 00:27:10.906
supply of labor is the next chart, and that's immigration.
00:27:10.906 --> 00:27:10.906
00:27:12.196 --> 00:27:15.426
I will immigration policies suggests that.
00:27:15.426 --> 00:27:18.486
our population growth is much faster than what you see in the US.
00:27:18.486 --> 00:27:21.746
so at least we have something that is compensating.
00:27:21.746 --> 00:27:24.926
for the lack of labor and that's new immigrants.
00:27:24.926 --> 00:27:27.946
In the US you don't have it, which means that any wage.
00:27:27.946 --> 00:27:31.286
inflation in the US might be might be.
00:27:31.286 --> 00:27:34.866
more significant than in Canada because they don't have this offsetting.
00:27:34.866 --> 00:27:37.926
force called immigration. But then of course there.
00:27:37.926 --> 00:27:41.206
is another factor, and that's the next chart which.
00:27:41.206 --> 00:27:43.046
is the supply chain.
00:27:43.106 --> 00:27:46.356
That we all read about in newspapers and feel on a daily basis.
00:27:46.356 --> 00:27:49.576
Listen, economists have many.
00:27:49.576 --> 00:27:50.416
many flaws.
00:27:52.666 --> 00:27:54.136
But amnesia is not one of them.
00:27:55.646 --> 00:27:57.466
We all remember the 1970s.
00:27:58.456 --> 00:28:01.636
And the big question is to what extent we.
00:28:01.636 --> 00:28:04.696
have a situation in which we.
00:28:04.696 --> 00:28:08.056
are back to the 70s, and I suggest the following.
00:28:08.056 --> 00:28:10.536
comparing the current situation.
00:28:11.396 --> 00:28:14.676
To the 1970s is not only.
00:28:14.676 --> 00:28:17.876
wrong, but also irresponsible this.
00:28:17.876 --> 00:28:20.886
is not the 1970s by any.
00:28:20.886 --> 00:28:22.516
stretch of the imagination.
00:28:23.716 --> 00:28:24.556
Back then?
00:28:25.266 --> 00:28:28.666
Baby boomers were consuming like there is no tomorrow. That's not.
00:28:28.666 --> 00:28:31.976
the case. Now back then, interest rates.
00:28:31.976 --> 00:28:35.236
were extremely extremely high. Today, the opposite.
00:28:35.236 --> 00:28:38.246
is the case back there and the level of death was lower, which means.
00:28:38.246 --> 00:28:41.256
that the sensitivity to higher interest rates was not the same.
00:28:41.256 --> 00:28:44.516
We cannot compare the current situation to the 19.
00:28:44.516 --> 00:28:47.656
0s and when people talk about the economy slowing down.
00:28:47.656 --> 00:28:51.016
stagflation, you all don't have it because we are seeing the economy.
00:28:51.016 --> 00:28:54.236
expanding by about 4% next year. That's.
00:28:54.236 --> 00:28:55.336
not stack flashing by.
00:28:55.396 --> 00:28:58.416
And it's touch of dementia Nation that sell bit of inflation in.
00:28:58.416 --> 00:28:59.396
a growing economy.
00:29:02.306 --> 00:29:03.546
And the issue.
00:29:04.226 --> 00:29:05.386
It's not just supply.
00:29:06.506 --> 00:29:09.666
The issue is actually demand more than supply. Let me explain.
00:29:09.666 --> 00:29:10.666
Let's go to the next chart.
00:29:12.226 --> 00:29:15.566
You see, look at the chart to the left. That's durable goods.
00:29:15.566 --> 00:29:15.566
00:29:18.456 --> 00:29:21.106
Look at the dotted line. The dotted line is where it should be.
00:29:22.076 --> 00:29:23.726
This solid line is where it is.
00:29:24.596 --> 00:29:27.656
So when it comes to services we are not back when it comes to.
00:29:27.656 --> 00:29:31.396
goods we are 20% higher than where we should be. Why?
00:29:31.396 --> 00:29:34.716
Because you press a button and you get your exercise bike.
00:29:34.716 --> 00:29:35.656
no issue.
00:29:37.096 --> 00:29:40.616
And it's still there. It's still up there, it's it doesn't corrected yet.
00:29:43.026 --> 00:29:46.166
A normally functioning supply system will face.
00:29:46.166 --> 00:29:47.416
major difficulties.
00:29:48.396 --> 00:29:51.966
Supplying these kind of shock in demand.
00:29:51.966 --> 00:29:55.126
in a very short period of time, a normally functioning supply.
00:29:55.126 --> 00:29:58.856
system and this is of course not a normally functioning.
00:29:58.856 --> 00:30:02.366
supply system. You have covid in China.
00:30:02.366 --> 00:30:05.586
Asia, you have situation in which you have to mortgage.
00:30:05.586 --> 00:30:08.766
your business to get a container from China. We are all.
00:30:08.766 --> 00:30:12.076
familiar with the story, the semiconductor story, so you have.
00:30:12.076 --> 00:30:13.446
a huge demand shock.
00:30:14.706 --> 00:30:18.546
Met with a weak and sick supply system.
00:30:18.546 --> 00:30:18.546
00:30:20.456 --> 00:30:21.046
That will do.
00:30:22.536 --> 00:30:25.036
But it's all covered. It's all covered.
00:30:25.776 --> 00:30:28.806
The minute you remove Covid from there question, this goes.
00:30:28.806 --> 00:30:32.006
back and the supply system will go back and it will happen.
00:30:32.006 --> 00:30:32.006
00:30:32.716 --> 00:30:35.796
So I buy the argument that this is not a permanent.
00:30:35.796 --> 00:30:39.306
situation, but it will last longer than expected.
00:30:39.306 --> 00:30:39.306
00:30:40.396 --> 00:30:42.686
And that's inflationary. In the short term.
00:30:43.566 --> 00:30:47.156
And when the Bank of Canada and the Fed are talking about short.
00:30:47.156 --> 00:30:50.496
lived inflation. They're talking about this but.
00:30:50.496 --> 00:30:53.756
one aspect is wages, and this we don't know because.
00:30:53.756 --> 00:30:57.556
when it comes to inflation, and that's very important inflation.
00:30:57.556 --> 00:31:00.716
is something that takes.
00:31:00.716 --> 00:31:01.516
time to.
00:31:02.196 --> 00:31:04.656
Develop. It's a lagging indicator.
00:31:06.756 --> 00:31:09.846
And it can impact your psyche. And if you believe that.
00:31:09.846 --> 00:31:13.026
inflation will continue to go up, you change your inflation.
00:31:13.026 --> 00:31:16.526
expectations and that's the nightmare. As far as the.
00:31:16.526 --> 00:31:19.636
Bank of Canada and the Fed are concerned, they would like you to keep your inflation.
00:31:19.636 --> 00:31:22.646
expectations and they will use all the tools they are to do so.
00:31:22.646 --> 00:31:25.906
once their tool interest rates. So let's discuss so.
00:31:25.906 --> 00:31:29.546
t's go to the next chart and see what's reasonable and what's not reasonable.
00:31:29.546 --> 00:31:29.546
le.
00:31:31.606 --> 00:31:35.126
Now inflation is accelerating and.
00:31:35.126 --> 00:31:38.236
that's in part due to the supply issues for.
00:31:38.236 --> 00:31:41.546
example, look at the used cars prices.
00:31:41.546 --> 00:31:44.626
contributing a significant amount.
00:31:44.626 --> 00:31:47.746
of inflation today because you don't have the semiconductor.
00:31:47.746 --> 00:31:50.786
The chips that, so that's something that will.
00:31:50.786 --> 00:31:54.026
fix itself over time the wage story.
00:31:54.026 --> 00:31:57.166
is still not there, but will come, so we believe.
00:31:57.166 --> 00:32:00.556
that overall inflation will accelerate over the next six months.
00:32:00.556 --> 00:32:02.346
reflecting the supply chain story.
00:32:02.486 --> 00:32:06.096
And then slowly we'll start going down toward something.
00:32:06.096 --> 00:32:09.136
normal. What will bring it to normal will be.
00:32:09.136 --> 00:32:10.076
higher interest rates.
00:32:11.066 --> 00:32:14.746
And here we have to discuss this the reaction.
00:32:14.746 --> 00:32:17.866
curve by the Bank of Canada and the Fed.
00:32:17.866 --> 00:32:21.086
Let's go to the next chart, and that's very very.
00:32:21.086 --> 00:32:23.606
interesting. The Bank of Canada.
00:32:24.566 --> 00:32:27.726
He's now tweeting about the possibility of raising interest rates early.
00:32:27.726 --> 00:32:31.126
in 2022, just recently just recently.
00:32:31.126 --> 00:32:34.256
the Bank of Canada was talking about 2023 to be.
00:32:34.256 --> 00:32:37.696
the first move. Now we're talking about early 2022.
00:32:37.696 --> 00:32:38.966
That's a huge change.
00:32:39.936 --> 00:32:43.506
And you can see that the market is getting very aggressive.
00:32:43.506 --> 00:32:47.396
The market now is pricing in no less.
00:32:47.396 --> 00:32:50.656
than six moves by the Bank of Canada.
00:32:50.656 --> 00:32:50.656
00:32:51.876 --> 00:32:55.046
In a 2020 to 6.
00:32:55.046 --> 00:32:57.746
moves, that's a very aggressive move.
00:32:58.386 --> 00:33:02.636
That was doubled. What was discounted before?
00:33:02.636 --> 00:33:02.636
00:33:04.066 --> 00:33:07.736
The Bank of Canada is expected to move aggressively.
00:33:07.736 --> 00:33:10.916
but the same market is expecting the Fed to move only twice.
00:33:10.916 --> 00:33:10.916
00:33:11.546 --> 00:33:13.426
In 2022
00:33:14.046 --> 00:33:15.756
so the Bank of Canada seeks.
00:33:16.896 --> 00:33:19.946
The Fed twice doesn't make any sense.
00:33:19.946 --> 00:33:23.196
especially given the fact that remember the point.
00:33:23.196 --> 00:33:26.286
about the American economy moving.
00:33:26.286 --> 00:33:28.226
faster than Canada.
00:33:28.886 --> 00:33:32.466
Still, the market is expecting interest rates, delta rise more slowly.
00:33:32.466 --> 00:33:34.606
Remember the story about wages?
00:33:35.336 --> 00:33:38.406
And the fact that they don't get the new.
00:33:38.406 --> 00:33:41.426
supply of new immigrants to is.
00:33:41.426 --> 00:33:42.366
wage pressures.
00:33:42.956 --> 00:33:46.676
Therefore inflation that can be higher still, the market is expecting.
00:33:46.676 --> 00:33:49.696
low interest rates in the lower interest.
00:33:49.696 --> 00:33:52.956
rates in the US and Canada. So something is missing.
00:33:52.956 --> 00:33:56.136
here and therefore we believe that they will meet somewhere in between.
00:33:56.136 --> 00:33:58.976
namely the Bank of Canada will not be as aggressive.
00:34:00.266 --> 00:34:03.336
And the Fed will be more aggressive than expected. And if you listen.
00:34:03.336 --> 00:34:04.236
to the thread now.
00:34:04.856 --> 00:34:08.276
Every day they are becoming more and more hawkish.
00:34:08.276 --> 00:34:11.676
So what's reasonable? Not in 2022.
00:34:11.676 --> 00:34:14.976
the Bank of Canada will move twice or three times. The Fed will now.
00:34:14.976 --> 00:34:18.236
move twice or three times and then another move the.
00:34:18.236 --> 00:34:20.006
year after. What's reasonable?
00:34:20.716 --> 00:34:23.786
A terminal rate, namely our high rates.
00:34:23.786 --> 00:34:26.906
can go if you look at the bank right now in Canada is.
00:34:26.906 --> 00:34:30.206
25 basis points. What is normal?
00:34:30.206 --> 00:34:33.546
rate about 2 to 25? That's.
00:34:33.546 --> 00:34:36.806
where I believe we are going over the next two to three years.
00:34:36.806 --> 00:34:39.926
What's the risk? The risk is that the market is.
00:34:39.926 --> 00:34:43.426
right. The risk is that the Bank of Canada will be moving.
00:34:43.426 --> 00:34:43.426
00:34:44.516 --> 00:34:45.156
Too quickly.
00:34:46.186 --> 00:34:49.526
Every economic recession over the past.
00:34:49.526 --> 00:34:53.006
40 to 50 years was helped if not caused.
00:34:53.006 --> 00:34:56.186
by monetary policy error, in which.
00:34:56.186 --> 00:34:59.186
central bankers raise interest rates way too quickly.
00:34:59.846 --> 00:35:00.326
And.
00:35:01.206 --> 00:35:02.486
Basically killed their economy.
00:35:04.046 --> 00:35:07.586
Even the 2008 mother of all recessions was helped.
00:35:07.586 --> 00:35:10.736
by the fact that before the recession, Greenspan.
00:35:10.736 --> 00:35:13.806
Bugden raise interest rates from 1% to 5%.
00:35:13.806 --> 00:35:15.426
over the course of breakfast.
00:35:19.186 --> 00:35:22.256
So when I meet with the Bank of Canada and I meet with the Bank of Canada.
00:35:22.256 --> 00:35:23.096
very often.
00:35:23.766 --> 00:35:27.186
Unfortunately my message is go slowly.
00:35:27.186 --> 00:35:27.186
00:35:27.876 --> 00:35:31.196
No need to move six times in.
00:35:31.196 --> 00:35:32.576
2022.
00:35:33.656 --> 00:35:37.096
Inflation is a lagging indicator. You don't want inflation to get too close.
00:35:37.096 --> 00:35:40.756
but at the same time we don't want to raise rates.
00:35:40.756 --> 00:35:43.956
too quickly and shock the economy by some insurance.
00:35:43.956 --> 00:35:43.956
00:35:44.846 --> 00:35:46.186
And remember, I told you.
00:35:46.896 --> 00:35:49.946
Nobody knows where inflation will be six months from now, so what?
00:35:49.946 --> 00:35:53.366
do you do when you don't know what to do? You don't take chances.
00:35:53.366 --> 00:35:56.446
and you start raising interest rates early, but you don't.
00:35:56.446 --> 00:35:59.726
overshoot and I believe that's a reasonable scenario.
00:35:59.726 --> 00:36:04.026
which means that the market.
00:36:04.026 --> 00:36:04.026
00:36:05.266 --> 00:36:08.766
Is looking at interest rates today and already.
00:36:08.766 --> 00:36:12.066
applying it to the stock market in terms of evaluation and.
00:36:12.066 --> 00:36:15.246
that's why energy. And that's why financials are doing.
00:36:15.246 --> 00:36:18.296
well. But at the same time, if you raise interest.
00:36:18.296 --> 00:36:19.166
rates too quickly.
00:36:20.346 --> 00:36:22.406
Doc talks very negative for the stock market.
00:36:23.896 --> 00:36:27.366
And therefore the fact that interest rates will not be rising as quickly.
00:36:27.366 --> 00:36:30.446
as the market is expecting make is making me.
00:36:30.446 --> 00:36:33.466
more optimistic about the stock market because the remember.
00:36:33.466 --> 00:36:35.746
the stock market is now pricing in six months.
00:36:36.636 --> 00:36:39.676
If we get three, it's actually positive for the stock market.
00:36:39.676 --> 00:36:43.116
In addition, I believe that the three moves.
00:36:43.116 --> 00:36:46.396
will reflect the fact that inflation will not be a major.
00:36:46.396 --> 00:36:49.716
issue, and economic growth in 2022 will be.
00:36:49.716 --> 00:36:53.056
around 4%. That's positive for earnings the pricing.
00:36:53.056 --> 00:36:54.376
power of many companies.
00:36:55.196 --> 00:36:58.526
Still there, because consumers are willing to buy so.
00:36:58.526 --> 00:37:01.866
I suggest that the stock market will outperform.
00:37:01.866 --> 00:37:04.946
the bond market over the next year, and I.
00:37:04.946 --> 00:37:08.286
like for example, dividend paying stocks because I think that.
00:37:08.286 --> 00:37:12.306
in this environment dividends will be a more significant.
00:37:12.306 --> 00:37:15.806
contributor to our overall return and.
00:37:15.806 --> 00:37:19.146
I like energy, for example because of the reason I mentioned earlier.
00:37:19.146 --> 00:37:22.786
I don't see a significant increase in.
00:37:22.786 --> 00:37:25.386
cost. I don't see a significant increase.
00:37:25.836 --> 00:37:29.296
In hiring or investment therefore.
00:37:29.296 --> 00:37:32.326
the cost function, which table is the same but profit is rising.
00:37:32.326 --> 00:37:36.176
because of higher prices that will be translated into better.
00:37:36.176 --> 00:37:36.176
00:37:36.586 --> 00:37:39.636
Valuations in the energy space I.
00:37:39.636 --> 00:37:42.666
think that's the direction we are going, and we already starting to see.
00:37:42.666 --> 00:37:45.736
it and then the next question of course.
00:37:45.736 --> 00:37:47.116
and that's the last one.
00:37:47.896 --> 00:37:49.016
Is to what extent?
00:37:49.756 --> 00:37:51.436
COVID-19 is an event.
00:37:52.566 --> 00:37:53.626
Only condition.
00:37:55.196 --> 00:37:58.616
And I believe that every crisis is.
00:37:58.616 --> 00:38:02.296
a trend accelerator and this crisis is not very different. Many of.
00:38:02.296 --> 00:38:05.876
those trends were there before ecommerce was there before we healthy education.
00:38:05.876 --> 00:38:07.856
Even Deglobalization was there before.
00:38:09.186 --> 00:38:10.186
But beyond that.
00:38:10.916 --> 00:38:14.856
What I'm asking is to what extent the potential.
00:38:14.856 --> 00:38:15.756
growth of the economy.
00:38:17.256 --> 00:38:19.026
The ability of the economy to grow.
00:38:20.606 --> 00:38:23.846
Has changed dramatically from a long term perspective due to covid.
00:38:23.846 --> 00:38:27.046
Let's assume that we are lucky, and let's assume.
00:38:27.046 --> 00:38:30.146
that by 2022 this pandemic is turning into.
00:38:30.146 --> 00:38:34.086
endemic and we simply live with it and you go back to semi normal.
00:38:34.086 --> 00:38:34.086
00:38:36.316 --> 00:38:39.526
Our ability to consume iron will our willingness.
00:38:39.526 --> 00:38:42.546
to consume is the same. Our willingness to invest.
00:38:42.546 --> 00:38:43.086
is the same.
00:38:44.676 --> 00:38:46.666
Interest rates will go back to semi normal.
00:38:47.896 --> 00:38:51.346
And therefore, I believe that the economically speaking, although.
00:38:51.346 --> 00:38:54.906
it doesn't look like that now, kovid is an event as.
00:38:54.906 --> 00:38:55.816
opposed to.
00:38:56.606 --> 00:38:57.376
Air condition.
00:38:58.286 --> 00:38:59.226
It is true.
00:38:59.906 --> 00:39:02.246
That the global economy is being transformed.
00:39:03.146 --> 00:39:06.426
But when the fog clears everything we look.
00:39:06.426 --> 00:39:08.646
very very familiar.
00:39:10.776 --> 00:39:13.976
I will stop here and see if we have time for a discussion.
00:39:13.976 --> 00:39:13.976
00:39:17.746 --> 00:39:20.806
Thanks, ben. We've we do have a few questions that have been.
00:39:20.806 --> 00:39:21.566
coming in.
00:39:21.616 --> 00:39:24.736
Uhm, one and I'll combine, I think.
00:39:24.736 --> 00:39:28.426
a couple of questions. I wonder if you could comment on the.
00:39:28.426 --> 00:39:31.786
obviously debt is growing dramatically.
00:39:31.786 --> 00:39:35.176
federal provincial debts? You've got a government.
00:39:35.176 --> 00:39:38.256
that seems hell bent on reducing or.
00:39:38.256 --> 00:39:41.306
eliminating oil and gas production here in Canada.
00:39:41.306 --> 00:39:44.736
What do you think that does for our petro dollar?
00:39:44.736 --> 00:39:47.826
Is it's long been known. What's the dollar going to look like?
00:39:47.826 --> 00:39:51.066
going forward? OK, so let's discuss the debt situation.
00:39:51.066 --> 00:39:54.566
Fails to fold, and then we'll discuss the currency so when it comes to.
00:39:54.566 --> 00:39:54.566
00:39:54.926 --> 00:39:56.416
Let me tell you one thing.
00:39:57.886 --> 00:40:01.476
The numbers are very well known the debt level.
00:40:01.476 --> 00:40:04.526
went up from 30% of GDP to 50% of GDP. The budget.
00:40:04.526 --> 00:40:07.846
deficit. We know the story, so he's going to pay down all this debt.
00:40:07.846 --> 00:40:07.846
00:40:08.716 --> 00:40:11.056
The short answer is nobody.
00:40:12.646 --> 00:40:15.996
Because governments don't pay down debt, that's the reality.
00:40:15.996 --> 00:40:19.336
Know Margaret Thatcher's in the 80s said.
00:40:19.336 --> 00:40:22.816
that governments are like families. They have to balance their budget.
00:40:22.816 --> 00:40:26.416
They have to pay down their debt. No, they are not families.
00:40:26.416 --> 00:40:28.896
because families don't have the Bank of Canada behind him.
00:40:30.236 --> 00:40:33.606
So what we are going to see is basically rolling.
00:40:33.606 --> 00:40:34.166
it over.
00:40:34.946 --> 00:40:38.376
And basically soon you will see the government trying to fix.
00:40:38.376 --> 00:40:41.556
rates and take advantage of those low interest rates before they go.
00:40:41.556 --> 00:40:41.856
up.
00:40:42.506 --> 00:40:45.546
So you will see a rolling over making sure that the economy is growing.
00:40:45.546 --> 00:40:48.716
faster than that, then that's enough, so I don't see paying.
00:40:48.716 --> 00:40:52.006
down debt anytime soon. That's one thing. The other is the dollar.
00:40:52.006 --> 00:40:55.106
and the question is why the dollar is so elevated. Part of it of.
00:40:55.106 --> 00:40:57.406
course has to do with the.
00:40:57.466 --> 00:41:00.566
The commodity market, and especially oil we know.
00:41:00.566 --> 00:41:04.386
that, but beyond that, remember what the market is expecting 6.
00:41:04.386 --> 00:41:07.026
moved by the Bank of Canada only two moves by the Fed.
00:41:08.236 --> 00:41:12.196
That's significant in terms of making the Canadian dollar more attractive.
00:41:12.196 --> 00:41:12.196
00:41:13.316 --> 00:41:16.486
No, let's assume for a second, and I think it's a reasonable assumption we're starting.
00:41:16.486 --> 00:41:19.896
to see that oil will stabilize, so it will be neutral.
00:41:19.896 --> 00:41:19.896
00:41:21.136 --> 00:41:24.246
And let's assume that for a second the market will start.
00:41:24.246 --> 00:41:28.286
realizing that maybe six is too aggressive and two from the USA is not.
00:41:28.286 --> 00:41:31.386
aggressive enough. They will meet somewhere in between that can take.
00:41:31.386 --> 00:41:34.526
one or two cents out of the value of the dollar. So we believe that the dollar.
00:41:34.526 --> 00:41:37.566
will remain more or less where it is for now and then, maybe at.
00:41:37.566 --> 00:41:40.696
one point in 2022. So we lose one or two cents reflecting this.
00:41:40.696 --> 00:41:43.726
miss passing in the market that we currently view.
00:41:43.726 --> 00:41:43.726
00:41:48.036 --> 00:41:51.376
Perfect shifting gears a little bit to health care.
00:41:51.376 --> 00:41:51.376
00:41:51.646 --> 00:41:54.896
So help you talked to a fair bit about.
00:41:54.896 --> 00:41:58.136
it. Do you think the reality is we're not spending enough?
00:41:58.136 --> 00:42:01.636
dollars on health care? Or is it the way we spend our dollars?
00:42:01.636 --> 00:42:04.796
That's a very, very good question. That's a very good question.
00:42:04.796 --> 00:42:08.356
and I wrote a paper about this.
00:42:08.356 --> 00:42:11.896
health care situation and my conclusion was basically.
00:42:11.896 --> 00:42:15.216
first of all, for sure, we need to look at it and.
00:42:15.216 --> 00:42:18.386
we need maybe to spend more money and inject more money and then.
00:42:18.386 --> 00:42:19.656
a lot of people responded to it.
00:42:19.756 --> 00:42:23.006
In the newspapers basically.
00:42:23.006 --> 00:42:26.116
saying it is true that we need to spend more, but we also have to be much.
00:42:26.116 --> 00:42:29.596
more efficient. We have to merge hospitals.
00:42:29.596 --> 00:42:33.056
We have to see how we spend the money. And I totally agree so.
00:42:33.056 --> 00:42:36.076
I will not get too much into it because we don't follow it very closely, but I.
00:42:36.076 --> 00:42:39.636
would say clearly we need to fix the situation regardless.
00:42:39.636 --> 00:42:42.736
what the right way is. We know that it's broken.
00:42:42.736 --> 00:42:45.936
Now if you operate at 95% capacity in normal.
00:42:45.936 --> 00:42:48.976
times and you basically reach capacity like that, something is.
00:42:48.976 --> 00:42:50.176
wrong. We have to fix it.
00:42:50.236 --> 00:42:53.426
And I totally agree, it's not just spending more money sending more money.
00:42:53.426 --> 00:42:56.746
and we are doing it as the government is spending more money to.
00:42:56.746 --> 00:42:59.816
the problems is not part of the budget. But I think we.
00:42:59.816 --> 00:43:02.986
have to look at the way we do business and the health care system there where.
00:43:02.986 --> 00:43:06.246
erate, hospitals. If to the extent that there is efficiency issues.
00:43:06.246 --> 00:43:07.986
Let's fix it because that's too important.
00:43:11.336 --> 00:43:14.846
Can you comment on gold in?
00:43:16.246 --> 00:43:19.616
A hedge for any number of things any.
00:43:19.616 --> 00:43:21.936
thoughts, yes?
00:43:22.726 --> 00:43:26.696
Clearly, first of all, when it comes to inflation, if inflation expectations.
00:43:26.696 --> 00:43:29.746
go up, that will fuel gold at.
00:43:29.746 --> 00:43:33.296
the same time, gold is not what it used to be because of Bitcoin, so.
00:43:33.296 --> 00:43:36.656
Bitcoin is actually competing with gold, and some of the.
00:43:36.656 --> 00:43:36.656
00:43:37.926 --> 00:43:41.266
Improvement in process. That goal was supposed to see.
00:43:41.266 --> 00:43:44.346
was actually seen in Bitcoin because they.
00:43:44.346 --> 00:43:47.466
basically serve the same purpose. If you wish so.
00:43:47.466 --> 00:43:51.506
when it comes to Bitcoin, I can tell you one thing. I have 0 interest.
00:43:51.506 --> 00:43:54.726
in the currency in the calling itself 0 interest.
00:43:54.726 --> 00:43:58.406
It's so volatile I don't care, but I'm fascinated.
00:43:58.406 --> 00:43:59.186
by the.
00:44:00.006 --> 00:44:00.606
Technology.
00:44:01.456 --> 00:44:02.456
And I think that's a future.
00:44:03.116 --> 00:44:06.256
But this future will arrive only after you regulate that.
00:44:06.256 --> 00:44:09.556
space in a significant way that will allow financial.
00:44:09.556 --> 00:44:12.636
institutions to use it without thinking compatibility too much.
00:44:12.636 --> 00:44:16.126
So that's more or less where we are going regulations going.
00:44:16.126 --> 00:44:19.156
back to gold, you really cannot talk about gold without talking.
00:44:19.156 --> 00:44:22.176
about bitcoin, unfortunately, because they really move at the.
00:44:22.176 --> 00:44:25.376
same direction and to the extent that inflation will.
00:44:25.376 --> 00:44:28.506
be an issue over the next six months, gold can benefit from.
00:44:28.506 --> 00:44:31.066
but much less than it used to in the past.
00:44:32.766 --> 00:44:35.926
Perfect hey, can you comment?
00:44:35.926 --> 00:44:39.026
on the great reset and how that's going to affect Canadian?
00:44:39.026 --> 00:44:39.526
banking?
00:44:41.046 --> 00:44:44.226
Reset of what? Sorry that that's the question.
00:44:44.226 --> 00:44:47.506
that I've got, so I'm not really clear on what.
00:44:47.506 --> 00:44:48.526
exactly that is.
00:44:49.166 --> 00:44:52.376
I'm not give us your thoughts.
00:44:52.376 --> 00:44:55.516
ts on the mix, yes, so uh.
00:44:55.516 --> 00:44:58.696
talking about a situation which now interest.
00:44:58.696 --> 00:45:01.706
rates are starting to rise, and that's actually benefiting.
00:45:01.706 --> 00:45:01.706
00:45:02.166 --> 00:45:05.226
And bunks. And that's definitely a factor.
00:45:05.226 --> 00:45:08.556
Another factor is that as banks would be allowed to.
00:45:08.556 --> 00:45:11.666
increase dividends now, and that's a positive for banks. So banks.
00:45:11.666 --> 00:45:14.846
have been doing relatively well. Relatively speaking we are going.
00:45:14.846 --> 00:45:18.026
to see a situation in which banks will use.
00:45:18.026 --> 00:45:21.126
this deposit. Remember, although all these modern.
00:45:21.126 --> 00:45:22.456
of money that we are sitting.
00:45:23.266 --> 00:45:26.716
And in terms of accumulation.
00:45:26.716 --> 00:45:29.996
of wealth over the past two years.
00:45:29.996 --> 00:45:31.266
is sitting in deposits account?
00:45:32.636 --> 00:45:34.496
They're all sitting in banks.
00:45:35.226 --> 00:45:38.316
And backs of so much liquidity they don't know what to do with it.
00:45:38.316 --> 00:45:41.576
so they're actually going to spend some money and they're going to.
00:45:41.576 --> 00:45:44.766
reprise things in a very significant way. And that's a positive thing.
00:45:44.766 --> 00:45:44.766
00:45:45.256 --> 00:45:48.546
Clearly, when you have interest rates rising, and maybe that's.
00:45:48.546 --> 00:45:52.186
what they meant, the reset reset of interest rates rising.
00:45:52.186 --> 00:45:55.656
What does it mean? For example, for the mortgage market and that's.
00:45:55.656 --> 00:45:59.226
very interesting, because clearly it will slow down the mortgage market.
00:45:59.226 --> 00:46:02.426
and I suggest that that's a good thing because the housing market.
00:46:02.426 --> 00:46:05.476
as I suggested earlier, was on fire because of Covid and.
00:46:05.476 --> 00:46:08.806
because the of the asymmetrical nature. So there are two things happening.
00:46:08.806 --> 00:46:12.106
here. Let's assume that interest rates go up next year by 1.
00:46:12.106 --> 00:46:13.446
e percent 100 basis points.
00:46:14.716 --> 00:46:15.826
If you have to renew.
00:46:16.456 --> 00:46:19.656
Your mortgage next year. You will not feel the pain.
00:46:19.656 --> 00:46:22.776
Why? Because your rate is already 100 basis points.
00:46:22.776 --> 00:46:23.656
higher than it is now.
00:46:24.546 --> 00:46:26.276
So it will be a wash.
00:46:26.946 --> 00:46:30.356
In fact, if you took a mortgage in the past between.
00:46:30.356 --> 00:46:33.396
2019, is 1718 and 19.
00:46:33.396 --> 00:46:36.346
you're not feeling the pain because interest rates back then were higher.
00:46:37.016 --> 00:46:40.056
If you took a mortgage in 20 and.
00:46:40.056 --> 00:46:43.096
21, namely during covid and originations went up by.
00:46:43.096 --> 00:46:46.456
30% during this period, then you are exposed.
00:46:46.456 --> 00:46:48.216
because your interest rates.
00:46:49.526 --> 00:46:52.636
Are much lower than what they might be in 2020.
00:46:52.636 --> 00:46:56.616
2020, 6-5 years from now, when you when you that's why.
00:46:56.616 --> 00:46:59.956
we are going to see a bit of an impact, so overall.
00:46:59.956 --> 00:47:03.176
I suggest that the main impact will not be on people renewing the.
00:47:03.176 --> 00:47:06.296
main impact will be on new buyers and.
00:47:06.296 --> 00:47:07.706
just to put things in perspective.
00:47:07.766 --> 00:47:10.876
Sales went up dramatically.
00:47:10.876 --> 00:47:14.026
during Covid and they might go down and that will be a good thing.
00:47:14.026 --> 00:47:14.906
in 2022.
00:47:18.356 --> 00:47:22.026
Perfect, haven't talked at all, but.
00:47:22.026 --> 00:47:25.406
a topic that's near and dear to us here in Alberta climate.
00:47:25.406 --> 00:47:28.926
change. Any thoughts on the impact on?
00:47:28.926 --> 00:47:32.406
I mean global economy, but in particular the Canadian.
00:47:32.406 --> 00:47:35.626
or even Western Canadian economies.
00:47:35.626 --> 00:47:35.626
00:47:37.296 --> 00:47:40.606
I wouldn't make it very clear point here that the notion.
00:47:40.606 --> 00:47:44.046
of you can add the economy and the environment moving together.
00:47:44.046 --> 00:47:46.846
and everybody is happy not going to happen.
00:47:47.806 --> 00:47:50.926
Not in the next five years, and I'm very, very clear about it.
00:47:50.926 --> 00:47:53.986
You cannot have a huge change, and it seems that.
00:47:53.986 --> 00:47:57.476
we are in the midst of a huge change when it comes to the environment and.
00:47:57.476 --> 00:47:59.626
policies. And there is this openness towards.
00:48:00.286 --> 00:48:01.376
Accepting the pen.
00:48:02.156 --> 00:48:03.736
Without impacting the economy.
00:48:04.896 --> 00:48:08.006
And this is simply not going to happen in the.
00:48:08.006 --> 00:48:11.286
short term. It's not going to happen. We are in a transition period 5.
00:48:11.286 --> 00:48:14.726
0 years from now. We might be able to marry the two and both will benefit.
00:48:14.726 --> 00:48:17.586
But while you were going through the transition, there is a cost.
00:48:18.566 --> 00:48:19.806
This goes up. This goes down.
00:48:20.656 --> 00:48:24.146
And I believe this will reduce the ability of the economy.
00:48:24.146 --> 00:48:27.226
to grow. The potential growth of the economy, and that's something.
00:48:27.226 --> 00:48:30.306
that we should accept. Or we should realize.
00:48:30.306 --> 00:48:31.566
that we have to accept.
00:48:32.396 --> 00:48:35.596
And if it means carbon tax, if it means other things, unfortunately.
00:48:35.596 --> 00:48:38.956
it also means that the potential growth of Alberta will.
00:48:38.956 --> 00:48:42.416
be impacted by that during this transition period, ironically.
00:48:42.416 --> 00:48:45.836
however, I expect Alberta to outperform.
00:48:45.836 --> 00:48:49.096
the rest of the country in 2022, economically speaking.
00:48:49.096 --> 00:48:52.116
you will be #1, but unfortunately from a low base.
00:48:52.116 --> 00:48:52.116
00:48:53.526 --> 00:48:57.076
It doesn't mean that the office buildings.
00:48:57.076 --> 00:49:00.156
will be full again, unfortunately, but when.
00:49:00.156 --> 00:49:03.316
ou start from a low base you moved fast and I think.
00:49:03.316 --> 00:49:06.486
that's what we are going to see. But I will. I'm not under any.
00:49:06.486 --> 00:49:07.076
on here.
00:49:07.766 --> 00:49:10.366
But the more we focus on the environment and we should.
00:49:11.756 --> 00:49:14.886
The more the damage will be to the rest of the economy and we have to accept it and.
00:49:14.886 --> 00:49:15.916
don't pretend that it's not there.
00:49:18.856 --> 00:49:22.216
Perfect any reason to be concerned about?
00:49:22.216 --> 00:49:25.606
a wage price spiral if.
00:49:25.606 --> 00:49:28.806
we do expect wages to increase and obviously a tight.
00:49:28.806 --> 00:49:31.836
labor market people not used to go into.
00:49:31.836 --> 00:49:35.066
work for awhile. So thoughts on that? That's it. That's it, that's.
00:49:35.066 --> 00:49:38.206
it. That's the question. That's the question, and we'll.
00:49:38.206 --> 00:49:41.406
see where just rising we see the bargaining power.
00:49:41.406 --> 00:49:44.886
of labor rising for the first time. They are able to get those.
00:49:44.886 --> 00:49:48.226
raises and the longer.
00:49:48.226 --> 00:49:48.836
it lasts.
00:49:49.506 --> 00:49:52.696
The more it gets into your psyche and when it gets to your.
00:49:52.696 --> 00:49:54.276
psyche, you expect more.
00:49:55.976 --> 00:49:56.436
No.
00:49:58.456 --> 00:50:01.586
The issue at the end of the day, at the end of the day, let's face it, the issue is.
00:50:01.586 --> 00:50:02.626
not inflation.
00:50:03.776 --> 00:50:06.836
Because we have 50 years of experience dealing with inflation.
00:50:06.836 --> 00:50:10.056
and the Bank of Canada and the Fed will tell.
00:50:10.056 --> 00:50:13.376
you we have the tools to deal with inflation. What are the tools?
00:50:13.376 --> 00:50:16.406
higher interest rates? So the question is not repression the question.
00:50:16.406 --> 00:50:19.856
is what will be the cost in terms of higher interest rates to bring this information back.
00:50:19.856 --> 00:50:20.436
to 2%.
00:50:23.126 --> 00:50:26.136
And my fear, and that's a risk.
00:50:26.916 --> 00:50:28.916
That if you start raising two quickly.
00:50:30.146 --> 00:50:33.526
To fight inflation to aggressively, you can raise interest rates too much.
00:50:33.526 --> 00:50:37.066
and that's why I'm watching wages so quickly.
00:50:37.066 --> 00:50:38.506
there is.
00:50:39.126 --> 00:50:40.536
A positive probability.
00:50:41.386 --> 00:50:44.416
Dot wages will rise faster than expected.
00:50:44.416 --> 00:50:47.616
and we'll get into the psyche of people and therefore the Bank of Canada.
00:50:47.616 --> 00:50:50.756
will have to be more aggressive to reduce those inflation expectations.
00:50:50.756 --> 00:50:54.096
and that can be too aggressive. That's the risk that we are facing now at.
00:50:54.096 --> 00:50:57.146
this point. This is like 20% probability, but the more.
00:50:57.146 --> 00:51:00.616
likely scenario in which they will go slowly and the.
00:51:00.616 --> 00:51:03.656
supply chain story will disappear 6.
00:51:03.656 --> 00:51:06.956
x months from now, and therefore the wage aspects will not be big enough.
00:51:06.956 --> 00:51:10.036
to inflate the economy. But there is a risk and we.
00:51:10.036 --> 00:51:11.166
have to admit that that's a risk.
00:51:13.426 --> 00:51:16.596
You touched on supply chain disruptions.
00:51:16.596 --> 00:51:19.656
and obviously there's covid related ones, but there's also the.
00:51:19.656 --> 00:51:22.886
events in British Columbia right now and that.
00:51:22.886 --> 00:51:26.236
disruption that's would you view that as more of a short term.
00:51:26.236 --> 00:51:28.816
or something to play. It will play on.
00:51:29.256 --> 00:51:32.416
Yeah, that's a natural disaster. Unfortunately, a very significant one.
00:51:32.416 --> 00:51:35.576
and as busy went through it over the past summer 3.
00:51:35.576 --> 00:51:38.656
hree times. Heartbreaking, but it's not.
00:51:38.656 --> 00:51:39.656
an economic event.
00:51:41.016 --> 00:51:44.036
Because the way it works, you have this destruction and.
00:51:44.036 --> 00:51:47.186
then you have the build up so it's just timing in.
00:51:47.186 --> 00:51:50.206
terms of economic activity. You go down one quarter.
00:51:50.206 --> 00:51:53.736
you go up 1/4 to compensate for that if.
00:51:53.736 --> 00:51:56.856
that. If you look at the period of 2 years that will.
00:51:56.856 --> 00:51:59.896
e filled from a long term perspective, so it's a.
00:51:59.896 --> 00:52:03.176
it's not, it's.
00:52:03.176 --> 00:52:06.276
something that impacts the economy from a short period of.
00:52:06.276 --> 00:52:09.516
time. It's very deep, very significant. But the recovery also.
00:52:09.516 --> 00:52:10.196
is very strong.
00:52:12.556 --> 00:52:12.936
K.
00:52:14.816 --> 00:52:18.036
Federal government policies. Do you see anything?
00:52:18.036 --> 00:52:21.486
that's either constructive, positive, or negative?
00:52:21.486 --> 00:52:25.026
in terms of sort of long term growth on canon, things like subsidized.
00:52:25.026 --> 00:52:25.696
childcare.
00:52:25.986 --> 00:52:29.096
Some of those sort of long term fundamental changes that.
00:52:29.096 --> 00:52:32.136
we're looking at. Yeah, what we are seeing now to put things.
00:52:32.136 --> 00:52:35.586
in perspective is a permanent increase, I believe.
00:52:35.586 --> 00:52:38.636
in government spending as a share of the economy we.
00:52:38.636 --> 00:52:41.736
see before the crisis, government spending as a share of GDP was.
00:52:41.736 --> 00:52:44.776
about 15%. It went to 30.
00:52:44.776 --> 00:52:48.326
0% during Covid was unsustainable. Now it's stabilizing.
00:52:48.326 --> 00:52:51.456
going down, but I suggest it will stabilize at, let's say.
00:52:51.456 --> 00:52:53.676
718% higher than it was.
00:52:55.406 --> 00:52:58.776
And that's a permanent increase in spending why we already have a national.
00:52:58.776 --> 00:52:59.676
day care system.
00:53:00.456 --> 00:53:03.486
We are talking about the significant injection of money to.
00:53:03.486 --> 00:53:04.766
health care as we discussed.
00:53:05.526 --> 00:53:09.116
Those are permanent changes. We're talking about making the EIS.
00:53:09.116 --> 00:53:09.116
00:53:09.356 --> 00:53:13.396
System more accommodating maybe.
00:53:13.396 --> 00:53:15.496
something for self employed.
00:53:16.116 --> 00:53:19.166
Dots, permanent increase and therefore I believe that the level of.
00:53:19.166 --> 00:53:22.216
activity will stabilize at a higher level at.
00:53:22.216 --> 00:53:23.376
one point you have to pay for it.
00:53:24.626 --> 00:53:27.656
And I would not be surprised if in addition to.
00:53:27.656 --> 00:53:30.946
all the tax measures that were introduced already there.
00:53:30.946 --> 00:53:34.446
will be some others. Maybe corporate taxes maybe?
00:53:34.446 --> 00:53:37.546
something along the line.
00:53:37.546 --> 00:53:40.626
of raising the inclusion rate on capital gain tax.
00:53:40.626 --> 00:53:44.126
I will not be totally shocked. Carbon money can.
00:53:44.126 --> 00:53:45.996
be used for general purposes.
00:53:46.926 --> 00:53:50.296
And we saw tax on banks coming.
00:53:50.296 --> 00:53:53.696
and you can question to what extent. It's a wide thing, but it's coming.
00:53:53.696 --> 00:53:56.816
And if they are totally desperate and I don't believe they will get to.
00:53:56.816 --> 00:54:00.456
this point, but you never know they will go after HST and GST.
00:54:00.456 --> 00:54:03.536
But that's something that is basically a political suicide.
00:54:03.536 --> 00:54:05.216
So I got I doubt it will do that.
00:54:08.436 --> 00:54:11.906
I'm switching orbit to trade a bit of.
00:54:11.906 --> 00:54:15.246
a little bit more protectionism in the world it.
00:54:15.246 --> 00:54:18.446
seems these days impact on Canada. I mean, we largely.
00:54:18.446 --> 00:54:21.626
export a great deal of our economy is exports.
00:54:21.626 --> 00:54:24.716
yes in a big way I believe and.
00:54:24.716 --> 00:54:27.986
that's something that we discussed before covid it started before.
00:54:27.986 --> 00:54:31.166
covid and that trend was accelerated during covid it.
00:54:31.166 --> 00:54:34.366
started with the Trump. Let's face it, the deglobalization.
00:54:34.366 --> 00:54:38.606
nature of trade globally and.
00:54:41.006 --> 00:54:44.456
And you realize that a 90% of your antibiotic.
00:54:44.456 --> 00:54:47.706
supplies coming from China you.
00:54:47.706 --> 00:54:50.856
wake up one morning and you say you realize that without China you cannot.
00:54:50.856 --> 00:54:54.256
build a car in North America because you're missing those semiconductors.
00:54:54.256 --> 00:54:54.256
00:54:54.916 --> 00:54:55.936
This has got to change.
00:54:56.806 --> 00:54:57.296
Big time.
00:54:58.446 --> 00:55:01.636
I estimate that about 20% of what America is buying.
00:55:01.636 --> 00:55:02.956
from China and I will come back home.
00:55:04.326 --> 00:55:05.356
And let's face it.
00:55:06.336 --> 00:55:09.466
Unfortunately, and this is something that I've been saying before.
00:55:09.466 --> 00:55:11.536
the crisis, we are in the midst.
00:55:12.816 --> 00:55:13.436
Of.
00:55:14.386 --> 00:55:15.096
A Cold War.
00:55:16.336 --> 00:55:19.766
A technology called more. It's not the Cold War going.
00:55:19.766 --> 00:55:23.646
back to the Soviet, but it's a cold war for my technology technology perspective.
00:55:23.646 --> 00:55:23.656
00:55:24.946 --> 00:55:28.236
And if there is a cold.
00:55:28.236 --> 00:55:29.776
War and you are a third party.
00:55:30.456 --> 00:55:32.956
What do you have to choose a side?
00:55:34.776 --> 00:55:38.606
Canada where you are. If you're Australia, that.
00:55:38.606 --> 00:55:41.686
our security needs are coming from the US, but your economic needs are.
00:55:41.686 --> 00:55:43.086
coming from China. Good luck with that.
00:55:44.676 --> 00:55:47.806
So what I suggest is that this is not a full scale.
00:55:47.806 --> 00:55:50.126
globalization. You cannot reverse it.
00:55:51.216 --> 00:55:54.656
What are the margin and those margins will be wider than expected you?
00:55:54.656 --> 00:55:57.766
will see we will see more money coming back or more production.
00:55:57.766 --> 00:56:00.256
coming back to North America and our job.
00:56:00.946 --> 00:56:03.466
Is to make sure that the by America.
00:56:04.456 --> 00:56:05.746
Means by North America.
00:56:06.516 --> 00:56:09.466
We have to be part of this exercise.
00:56:10.246 --> 00:56:13.356
And I think that's the direction we are going this by.
00:56:13.356 --> 00:56:17.186
the way, can have some inflationary implications because if globalization
00:56:17.186 --> 00:56:20.326
n was the disinflationary deglobalization is.
00:56:20.326 --> 00:56:22.506
s the opposite. So that's something to think about.
00:56:24.226 --> 00:56:27.316
For sure, so when we got a couple left here and we do.
00:56:27.316 --> 00:56:30.396
want to be because of the time and get you out of here.
00:56:30.396 --> 00:56:33.576
on the on our on the schedule. Do you see?
00:56:33.576 --> 00:56:36.596
any asset classes that are instant that institutions are using?
00:56:36.596 --> 00:56:39.756
to deal with inflation risk? Or are they viewing it as more?
00:56:39.756 --> 00:56:40.826
temporary as well?
00:56:41.256 --> 00:56:44.286
Are you think you've mentioned gold earlier?
00:56:44.286 --> 00:56:47.706
cryptocurrencies? Do we see institutions stepping?
00:56:47.706 --> 00:56:48.686
into those spaces at all?
00:56:49.776 --> 00:56:53.256
Yes, to an extent. We see more gold activity.
00:56:53.256 --> 00:56:56.536
people just hedging making sure that that's the case you look.
00:56:56.536 --> 00:57:01.196
at the plane, the bond market just incase inflation is accelerating.
00:57:01.196 --> 00:57:04.586
you can actually play the bond market. You can invest in real bonds the tip market.
00:57:04.586 --> 00:57:08.176
So there are many ways to actually edge yourself against inflation and at the margin.
00:57:08.176 --> 00:57:11.386
we're starting to see it. Many institution investors cannot take the risk.
00:57:11.386 --> 00:57:14.456
of just single can. Trust me, it's everything and nothing will happen because.
00:57:14.456 --> 00:57:17.796
as I suggested, nobody knows. So there is a lot of.
00:57:17.796 --> 00:57:19.336
hedging happening at this point.
00:57:20.856 --> 00:57:24.976
Perfect and looks like the last one we've got any.
00:57:24.976 --> 00:57:28.416
thoughts on the impact Mark Carney? Pressure obviously.
00:57:28.416 --> 00:57:31.516
very influential individual in Canada? Pressure to restrict?
00:57:31.516 --> 00:57:35.496
financial institutions from lending to oil and gas companies? Yes.
00:57:35.496 --> 00:57:38.876
that would be a very gradual process I.
00:57:38.876 --> 00:57:42.036
think that we all realize that you cannot just shut.
00:57:42.036 --> 00:57:45.116
down energy in Canada and go home. This is.
00:57:45.116 --> 00:57:48.316
a pressure, but with all due respect, other suggested.
00:57:48.316 --> 00:57:50.396
ou have to do it on a gradual basis.
00:57:50.706 --> 00:57:53.946
We believe that the energy sector.
00:57:53.946 --> 00:57:57.286
in Canada is going to lead.
00:57:57.286 --> 00:58:00.706
the way towards greener economy in terms of free R&D and.
00:58:00.706 --> 00:58:03.986
we know that that's the case in Alberta. Is heading this direction.
00:58:03.986 --> 00:58:07.086
So I suggest that yes, at the margin.
00:58:07.086 --> 00:58:10.266
there will be less credit going to high polluters, but at?
00:58:10.266 --> 00:58:13.346
the same time, with the improvement that we see in Alberta in terms.
00:58:13.346 --> 00:58:16.446
of reducing emission, you will see this process being.
00:58:16.446 --> 00:58:18.946
very very slow or regardless, what county is saying.
00:58:21.496 --> 00:58:22.096
Perfect.
00:58:22.926 --> 00:58:26.556
We are about 5 minutes ahead of schedule.
00:58:26.556 --> 00:58:29.586
Ben, I want to thank you for taking the time.
00:58:29.586 --> 00:58:32.756
to join us and to inform.
00:58:32.756 --> 00:58:35.816
us always very insightful. We genuinely appreciate it.
00:58:35.816 --> 00:58:38.956
and we'll look to invite you back.
00:58:38.956 --> 00:58:42.036
here as soon as we possibly can and hopefully do it in.
00:58:42.036 --> 00:58:45.456
person and show you a little bit of Alberta and Calgary hospitality.
00:58:45.456 --> 00:58:48.566
So let's do it in April or May.
00:58:48.566 --> 00:58:48.576
00:58:50.016 --> 00:58:50.506
Yeah.
00:58:52.396 --> 00:58:55.766
Alright, thank you sir. Appreciate your time at.
00:58:55.766 --> 00:58:56.746
pleasure. Good luck.
00:58:57.396 --> 00:58:59.196
Thank you everyone. Have a wonderful afternoon.
Your journey inspires us
November 18, 2021
We're proud to be part of our clients’ journeys and to help them make their ambitions real.
Music plays
(Visual: The red CIBC logo slides in on the top left. Multiple quick flashes of lightning streak across the dark sky, illuminating the dark purple clouds.)
CIBC logo
(Visual: An empty street, with houses on either side. Hurricane-force winds whip trees and power lines back and forth, rain falls heavily, pooling on the road. The red CIBC logo in the top left fades out.)
Barrie Hall: Our busy season really starts in June.
(Visual: Trees bend in the strong wind from a hurricane, leaves blowing one direction and then the other, a palm tree whips side to side, as heavy rain falls, making ripples on the ocean behind the trees, which is scattered with pieces of debris floating on the water.)
Barrie Hall: The hurricanes start spinning up at that time.
(Visual: A strong gust of wind blows a large piece of a roof off of a building. It flies quickly up and away in the wind, breaking apart as it turns end to end in strong gusts of wind and rain. Debris litters the street. The trees around the building sway from side to side, and bits of leaves fly off the palm trees.)
(Visual: A scenic view of a coastal highway stretching off into the distance, with light traffic in the many lanes, running alongside the ocean, where waves break along the shore in large sprays of white foam.)
(Visual: A group of three people wade slowly and carefully through thigh-high flood water towards a building with a large nature mural on the side. A man in a wet grey t-shirt and shorts rests his arm on the shoulder of a man in a red baseball cap and black and grey hoodie, and black pants soaked with water, who holds out his hand to help steady the man. Slightly ahead of the two men is the third man, in a blue t-shirt. He is walking toward a silver pickup truck, where two women stand throwing belongings in through the truck’s windows. Beyond the truck, a river overflowing with water is separated from the flooded road by a small group of bushes. Large chunks of debris float by in the river.)
(Visual: Interview shot, Tim Noble and Barrie Hall, inside a large industrial-sized garage. Two orange and white bucket lift trucks are parked behind them. The orange and black T&T Line Construction logo is painted on the door of the truck directly behind them. They sit side by side, Tim Noble on the left in a blue plaid shirt, and Barrie Hall on the right in a dark blue golf-style shirt. Barrie Hall looks at Tim Noble as he talks. A red rectangle slides in from the left. Text appears in white identifying Tim and Barrie.)
Barrie Hall: We've traveled most of the eastern seaboard as far as Miami, Florida.
Tim Noble & Barrie Hall
CIBC Clients
Tim Noble: Alabama.
(Visual: A heavy rain obscures all but the silhouettes of trees and power lines in the distance. In the foreground, hydro poles and power lines lean over, and others lay strewn about, splintered, and twisted on the road. One pole hangs suspended in the air in a tangle of wires.)
Barrie Hall: Georgia.
(Visual: Two workers, in bucket lifts work high up in the air, at the top of a hydro pole, fixing and attaching wires. The workers are silhouetted against the darkening sky, their features indistinct. They wear lamps on their hard hats, lighting their way as they work.)
Barrie Hall: To bring the power back.
(Visual: A black SUV slowly moves through an empty middle space between two rows of trucks in of a fleet of orange and white T&T Line Construction trucks. The trucks are different sizes and configurations, some smaller and boxier, and some longer, with bucket lifts on top.)
Barrie Hall: And when we roll in as a company, people cheer.
(Visual: Close up on the front wheels of the black SUV as they roll to a stop.)
(Visual: Close up on the window of the black SUV. Barrie Hall sits in the driver’s seat. He is partially lit by sunlight, and partially in shadow. He wears a dark blue golf-shirt style T&T Line Construction uniform shirt, with a T&T Line Construction logo patch on the chest and a logo patch on the arm with a Canadian flag intertwined with an American flag. He is wearing glasses, and has short grey hair.)
Barrie Hall: Because they know that we’re there to help them,
(Visual: A man stands in silhouette in a darkened garage. His back is to the camera, and he is facing a large white garage door, which is slowly opening, moving upwards.)
Barrie Hall: and to possibly save lives.
(Visual: As the garage door opens, light streams into the garage, revealing the large fleet of orange and white trucks parked outside. The man stands, still silhouetted in the doorway.)
Barrie Hall: And we just kept growing and growing, because the demand was there.
(Visual: Looking into the garage, the interior is dim compared to the bright sunshine outside. Tim Noble steps out of the garage into the sunlight. He is wearing a blue and white plaid dress shirt with a T&T Line Construction logo patch on the chest. He is cleanshaven, with white hair, and is looking intently forward.)
Barrie Hall: And that’s when we reached out to CIBC for support.
(Visual: The screen fades to white, and text appears in red in the centre of the screen.)
T&T Line Construction
Fredericton, New Brunswick
(Visual: Close up on a man’s hands putting on thick brown work gloves with bright yellow stripes on the backs. He is standing inside the garage with the large white door.)
(Visual: A man in a dark blue uniform shirt carries a green safety harness in front of him as he walks outside, past the row of white T&T Line Construction trucks.)
Barrie Hall: When Tim and I decided we’d form this company,
(Visual: Close up on a man’s hands. He holds a coil-shaped metal part on a rectangular frame in front of him, wearing thick brown work gloves. He is wearing a dark blue uniform, and his face is offscreen. He stands in front of an open door of a panel, leaning over the rectangular slots inside. He gently places the coil-shaped metal part into an open space inside the panel.)
Barrie Hall: we started out thinking we were gonna have five trucks each.
(Visual: Close up on a clipboard holding a form with three columns on it. The left column is full of lines of type, and the other two columns are blank. Different headings separate sections on the form. The clipboard is being held by a person wearing thick brown work gloves. The person is holding the clipboard in front of them as they walk through the row of T&T Line Construction trucks.)
Barrie Hall: We’ll do a little work, help some people out.
(Visual: Interview shot, Tim Noble and Barrie Hall, inside the large garage. Orange and white bucket lift trucks are parked behind them. The orange and black T&T Line Construction logo is painted on the door of the truck directly behind them. They sit side by side, Tim Noble on the left and Barrie Hall on the right. Barrie Hall looks at Tim Noble and smiles as he talks.)
Tim Noble: Weekend trip.
Barrie Hall: Yeah, a weekend trip, yeah. (Laughs)
(Visual: Close up on the headlights and grilles of a row of white T&T Line Construction trucks. The closest truck has a black number 10 on the hood, just above the grille. The trucks are gleaming in the sun, sitting outside in the parking lot, with tall trees in the background.)
(Visual: Close up on the headlights and grilles of another, longer row of white T&T Line Construction trucks. An orange safety cone sits halfway down the row of trucks, directly in front of one of them. The second truck in the row has a black number 67 on the hood, just above the grille. The trucks are gleaming in the sun, sitting outside in the parking lot, with a large grey building in the background.)
(Visual: Close up on a black number 83 on the hood of a white truck, just above the grille, which is gleaming in the sunshine.)
Barrie Hall: We went from five trucks, ten trucks, 20, to 40.
(Visual: Interview shot, close up of Tim Noble, sitting in front of orange and white parked bucket lift trucks inside the garage.)
Tim Noble: Today we’ve got over 200 vehicles in our fleet.
(Visual: A male worker in the dark blue T&T Line Construction unform shirt, with a brown beard and moustache, wearing thick work gloves, a blue hard hat, and sunglasses, closes a panel on the side of one of the white trucks in the parking lot. Another worker, also wearing a blue hard hat, and sunglasses, stands nearby, the garage in the background.)
(Visual: The man in the blue hard hat who was standing by climbs into the passenger seat of the truck through the open door. The interior of the truck is grey, and the sun shines through the windshield.)
(Visual: The other man with the beard and moustache who closed the truck’s panel, puts on his seatbelt in the driver’s seat. He is also still wearing a blue hard hat, sunglasses, and dark blue uniform shirt. )
Barrie Hall: Once we get that call, and things start spinning up,
(Visual: Close up on the white truck door swinging closed.)
(Visual: Close up on the white truck door on the other side swinging closed.)
Barrie Hall: The meter is rolling at that time.
(Visual: Close up on another white truck’s driver’s side door swinging closed. The T&T Line Construction Ltd. orange swirl logo with the words in black is painted in the centre of the truck door.)
(Visual: Overhead view as the two long lines of orange and white T&T Line Construction trucks in the fleet start driving down the centre aisle and offscreen one by one, leaving only a few trucks, spaced out, still sitting in the lot.)
Barrie Hall: The cost? It’s quite phenomenal.
(Visual: A white truck drives through the now nearly empty lot, picking up speed as it moves toward the road. The view moves along with the truck, looking forward from just below window level on the truck, with the T&T Line Construction logo on the door in the foreground. As the truck moves onto the road, a solid yellow centre line divides the lanes. Trees and bushes line the road, and the sky is blue.)
Barrie Hall: We have to feed everybody,
(Visual: The truck moves past a white house with a red roof, past another car going the other direction, continuing at a steady speed to move down the road, the view still moving along with the truck, looking forward from just below window level.)
Barrie Hall: fuel the vehicles,
(Visual: The driver sits in the driver’s seat, in profile, looking forward, both hands on the wheel. He is wearing his blue hard hat and sunglasses. Tall trees pass by, glimpsed through the windshield. )
Barrie Hall: Lodge everybody, it’s a lot of money.
(Visual: A view through the windshield of the truck. The radio cable hangs down in a curve in the top centre of the windshield. The driver’s hands sit on the steering wheel, visible in the left of the windshield. Tall trees grow along the side of the road. A grey car drives past on the other side of the road as the truck moves along.)
(Visual: Close up on a dark blue suit jacket lapel, where a silver pin with the CIBC logo on it sits just below the buttonhole gleaming in the sun.)
(Visual: Two men, their backs to the camera, the one on the right in a blue suit, and one on the left in a grey suit, walk towards Tim Noble and Barrie Hall, across a parking lot. The man in grey waves, and Tim and Barrie wave back. Cars are parked in front of a grey building in the background.)
Barrie Hall: Knowing that CIBC is behind us and we can depend on them,
(Visual: Close up on the men’s hands as they move close together in the parking lot. They all extend their hands, and Barrie shakes the hand of the man in the blue suit in the foreground, and Tim shakes the hand of the man in the grey suit in the background.)
Barrie Hall: that makes them an integral part of our team.
(Visual: Interview shot, Tim Noble and Barrie Hall, inside the garage. Orange and white bucket lift trucks are parked behind them. The orange and black T&T Line Construction logo is painted on the door of the truck directly behind them. They sit side by side, Tim Noble on the left and Barrie Hall on the right. Barrie moves his hands expressively as he speaks.)
(Visual: Close up on Barrie Hall as he continues to speak, sitting in the garage.)
Barrie Hall: I feel that they understand that when we’re out rolling, they gotta be right there rolling with us.
(Visual: Five men sit in a circle inside the garage, which is brightly lit, the orange and white lift trucks still parked in the background, with the orange and black T&T Line Construction logo visible on the truck behind them. The men sit on metal folding chairs. Barrie Hall and Tim Noble sit on the right, with the men from CIBC on the left, in blue and grey suits, and another man with light brown hair in a black suit.)
(Visual: Close up on Tim Noble and Barrie Hall. Both smile widely as they converse with the other men.)
Barrie Hall: The team at CIBC has been great for us.
(Visual: Close up on Barrie’s hands as he moves them expressively while he speaks to the other men.)
(Visual: Close up on the man in the black suit, who has short brown hair, and is cleanshaven. He is nodding slowly as he listens with an interested expression.)
(Visual: Close up on the man in the grey suit. He has short blond hair and is cleanshaven, wearing a dark-coloured tie. He nods as he speaks.)
(Visual: Interview shot, Barrie Hall, in the garage, sitting in front of the orange and white trucks.)
Barrie Hall: Getting some financing in place to help us not have to worry when we’re on one of these trips.
(Visual: The men sit in a circle on folding chairs in the parking garage talking, all leaning in and talking intently and smiling.)
Tim Noble: Once they found out what we were doing, and what our needs were,
(Visual: Tim Noble, interview shot, sitting in the garage, in front of the orange and white trucks.)
Tim Noble: it helped us a long way in getting to where we are.
(Visual: Close up on the silver CIBC pin on the man in the grey suit’s lapel. He is wearing a tie that matches the colour of his suit. He sits in the chair, the background out of focus behind him.)
(Visual: Close up of the same man in profile. He is speaking to the others in the circle of metal folding chairs in the garage. The man in the blue suit sits in the background, watching the man in the grey suit as he speaks.)
Barrie Hall: But they’ve also helped us individually to look at our future.
(Visual: Barrie Hall sits in a metal folding chair in the garage, in the circle with the other men, smiling, laughing and nodding at something offscreen. He is looking in the direction of the other men in the circle. Behind him the orange and white trucks are parked in the background. A beam of sunlight sits across the right side of Barrie’s body.)
(Visual: Close up on Tim Noble as he sits in the circle, talking to the other men. He has a thoughtful expression, and is speaking to someone offscreen. Behind him, tools hang in rows covering the wall. He turns as he speaks so that he addresses different people in the circle, who are all offscreen.)
Barrie Hall: Not only us as individuals, but our families.
(Visual: A wide view of the garage shows the whole circle of men in metal folding chairs, talking. The man in the blue suit and the man in the grey suit sit with their backs to the camera, and Barrie and Tim sit on the right. The man in the black suit sits on the left of the circle, his face visible in profile. The men in the circle talk animatedly with each other. Tools hang on the garage wall behind them, and a small portion of the garage is reflected in a truck’s side mirror in the foreground, on the left.)
Barrie Hall: We have this wealth through what we’ve done and how we’ve grown,
(Visual: Close up on the driver’s hands on the steering wheel of one of the white trucks. He is wearing a dark blue T&T Line Construction uniform shirt, of which just the sleeve can be seen. Outside the windshield of the truck, trees and bushes pass by at a steady rate of speed.)
Barrie Hall: and they’ve been helping us manage all that.
(Visual: Close up on the driver’s face. He has long curly brown hair to his shoulders, and is wearing a blue hard hat. He has black mirrored wraparound sunglasses, and is looking straight ahead as the truck moves down the road. He is wearing the dark blue uniform shirt. Behind him, through the windshield of the truck, tall trees can be seen, and as he moves the truck into a right turn, his hands moving on the wheel, a white house passes by outside along with a scenic view of the road as the car turns into a driveway. A brick pillar sits at the end of the driveway, and he pulls into the lot in front of a large grey building. As the truck turns the corner, a red rectangle slides in from the left, with text identifying Tristen Noble in white.)
Barrie Hall: It’s something that needs to really be pushed forward, to the new generation. It’s not only about us,
Tristen Noble
Tim’s Son
(Visual: Interview shot, Tim Noble and Barrie Hall, inside the garage. Orange and white bucket lift trucks are parked behind them. The orange and black T&T Line Construction logo is painted on the door of the truck directly behind them. They sit side by side, Tim Noble on the left and Barrie Hall on the right. Barrie moves his hands expressively as he speaks.)
Barrie Hall: it’s about reaching out,
(Visual: Interview shot, Barrie Hall, in the garage, sitting in front of the orange and white trucks.)
Barrie Hall: and helping people within the community as well.
(Visual: A wide view of the garage shows the whole circle of men in metal folding chairs, talking. The man in the blue suit and the man in the grey suit sit with their backs to the camera, and Barrie and Tim sit on the right. The man in the black suit sits on the left of the circle, his face visible in profile. The men in the circle talk animatedly with each other. Tools hang on the garage wall behind them, and a ladder and more tools sit in the foreground.)
(Visual: The camera slowly moves around Barrie Hall and Tim Noble sitting in the circle of men. Barrie Hall sits with his hands on his knees, looking at Tim Noble as he speaks, who also sits with his hands on his knees, looking around the circle intently.)
Tim Noble: CIBC has exceeded my expectations.
(Visual: Interview shot, Barrie Hall, in the garage, sitting in front of the orange and white trucks. He moves his hands expressively as he speaks.)
(Visual: Close up on Tim Noble’s face. He is smiling and looking offscreen. Tools hang in rows on the wall behind him.)
Barrie Hall: We feel comfortable knowing that CIBC is behind us.
(Visual: Close up on Barrie Hall’s face. He is smiling and looking offscreen. Tools hang in rows on the wall behind him. A beam of sunlight shines to his left, and reflects light on his face. He laughs heartily, leaning back in his chair.)
Barrie Hall: They have our back so that we have our clients’ back. It’s a really good feeling.
(Visual: The screen fades to red as the CIBC logo flies in to the centre of the screen in white. Text appears below in white.)
CIBC logo
Ambitions made real™
The CIBC logo and “Ambitions made real” are trademarks of CIBC.
Music ends
(Fades to black)