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Are stock markets overvalued? Yes and no and maybe…and don’t worry about it

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A long time ago, back in 2008, a co-worker at the company I was then at talked himself out of buying Apple stock because it had risen to $100 a share or so, double what it had been a few years prior. I felt for the guy, he really wrestled with the decision, he’d done his homework, and loved the company. He would hover tormentedly over his keyboard trying to hit the “buy” button, but despite the ever-more theatrical anguish, he couldn’t do it. Too expensive was too expensive and he took a pass.

I was fortunate to move on and lose touch with the guy before Apple’s stock took off to $700/share over the next few years; based on his inner turmoil at not buying at $100 he must have been wailing like an air raid siren at seven times that. Then it got “worse” – Apple stock split 7 for 1, the price was adjusted to $100, and has now risen back up over $300/share. A stock that seemed overvalued in 2008 went on to increase in value 20-fold in the next dozen years. Is Apple stock overvalued now?

Hope you’re not asking me, I haven’t the foggiest idea. By some yardsticks it likely is but it was in 2008 as well. 

Now, that’s a crazy growth stock, one of the world’s biggest success stories, so probably not a great example. But maybe we can glean something from looking at others that seem somewhat predictable for a number of reasons.

We could take airline or hotel stocks, which to my mind should be worth zero, but are not, so my mind is clearly wrong. I don’t see how their value can be ascertained when we don’t know at all what travel patterns will shape up as, and both these industries live or die based on utilization rates.

We could also look at blue-chip companies that are bought mainly for yield; are they overvalued? Well, companies bought for yield often are priced according to interest rate expectations, because that is the competition for yield seekers. We can now see that government bonds yield almost nothing, or less than nothing in some countries, so what is an appropriate yield level for a big stable dividend company?

Years ago, I unwisely did not put any money in big blue-chip stocks because their dividend yield was usually 2-4 percent, and I couldn’t see getting ahead by watching that snail move along (my chosen alternative, to chase growth stocks, was far more interesting, in the sense that a car bouncing down a mountainside is interesting). 

Now, many big blue-chip stocks are yielding 5-7 percent, an enormous gap to both the “risk-free” (haha) yield of government instruments and inflation expectations. So are these stocks undervalued?

That would seem incredibly hard to believe, given how the stock market has risen in the past month or so, in a world that remains incredibly unstable and drowning in debt. Unemployment rates are at levels that were unthinkable 6 months ago, and there is potential widespread devastation amongst small businesses (and larger ones for that matter – Volkswagen reported about a month ago that they were hemorrhaging cash at a rate of $2.2 billion per week).

It can all drive you crazy, but it can help to focus on some friendly realities that exist in the stock market. There are investments that hold up in the very long term. The Motley Fool investor website recently listed 3 Canadian stocks that have paid dividends continuously for over a century: Bank of Montreal, Imperial Oil, and BCE (aka Bell Canada). 

Value shmalue. If you’re investing to help yourself retire one day, pick a handful that have impressive dividend histories, reinvest the dividends, and don’t get too rattled by the news. It might be boring, but far better to be bored and rich than broke and wild-eyed.

For more stories, visit Todayville Calgary.

Terry Etam is a twenty-five-year veteran of Canada’s energy business. He has worked at a number of occupations spanning the finance, accounting, communications, and trading aspects of energy, and has written for several years on his own website Public Energy Number One and the widely-read industry site the BOE Report. In 2019, his first book, The End of Fossil Fuel Insanity, was published. Mr. Etam has been called an industry thought leader and the most influential voice in the oil patch. He lives in Calgary, Alberta.

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CBC’s business model is trapped in a very dark place

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The Audit

 

 David Clinton

I Testified Before a Senate Committee About the CBC

I recently testified before the Senate Committee for Transport and Communications. You can view that session here. Even though the official topic was CBC’s local programming in Ontario, everyone quickly shifted the discussion to CBC’s big-picture problems and how their existential struggles were urgent and immediate. The idea that deep and fundamental changes within the corporation were unavoidable seemed to enjoy complete agreement.

I’ll use this post as background to some of the points I raised during the hearing.

You might recall how my recent post on CBC funding described a corporation shedding audience share like dandruff while spending hundreds of millions of dollars producing drama and comedy programming few Canadians consume. There are so few viewers left that I suspect they’re now identified by first name rather than as a percentage of the population.

Since then I’ve learned a lot more about CBC performance and about the broadcast industry in general.

For instance, it’ll surprise exactly no one to learn that fewer Canadians get their audio from traditional radio broadcasters. But how steep is the decline? According to the CRTC’s Annual Highlights of the Broadcasting Sector 2022-2023, since 2015, “hours spent listening to traditional broadcasting has decreased at a CAGR of 4.8 percent”. CAGR, by the way, stands for compound annual growth rate.

Dropping 4.8 percent each year means audience numbers aren’t just “falling”; they’re not even “falling off the edge of a cliff”; they’re already close enough to the bottom of the cliff to smell the trees. Looking for context? Between English and French-language radio, the CBC spends around $240 million each year.

Those listeners aren’t just disappearing without a trace. the CRTC also tells us that Canadians are increasingly migrating to Digital Media Broadcasting Units (DMBUs) – with numbers growing by more than nine percent annually since 2015.

The CBC’s problem here is that they’re not a serious player in the DMBU world, so they’re simply losing digital listeners. For example, of the top 200 Spotify podcasts ranked by popularity in Canada, only four are from the CBC.

Another interesting data point I ran into related to that billion dollar plus annual parliamentary allocation CBC enjoys. It turns out that that’s not the whole story. You may recall how the government added another $42 million in their most recent budget.

But wait! That’s not all! Between CBC and SRC, the Canada Media Fund (CMF) ponied up another $97 million for fiscal 2023-2024 to cover specific programming production budgets.

Technically, Canada Media Fund grants target individual projects planned by independent production companies. But those projects are usually associated with the “envelope” of one of the big broadcasters – of which CBC is by far the largest. 2023-2024 CMF funding totaled $786 million, and CBC’s take was nearly double that of their nearest competitor (Bell).

But there’s more! Back in 2016, the federal budget included an extra $150 million each year as a “new investment in Canadian arts and culture”. It’s entirely possible that no one turned off the tap and that extra government cheque is still showing up each year in the CBC’s mailbox. There was also a $93 million item for infrastructure and technological upgrades back in the 2017-2018 fiscal year. Who knows whether that one wasn’t also carried over.

So CBC’s share of government funding keeps growing while its share of Canadian media consumers shrinks. How do you suppose that’ll end?

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Can’t afford Rent? Groceries for your kids? Trudeau says suck it up and pay the tax!

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Watch Canada’s Prime Minister tell an anti-poverty group, your ability to buy “groceries for my kids” is less important than sacrificing to pay his carbon tax.

In case you still thought there might be even the tiniest chance Justin Trudeau might come around.. well this settles it. He is as they say, ‘beyond the pale’.

Sure we’ve pieced this together over the last number of years, but it’s still SHOCKING to see him say it directly, proclaim it proudly. This week Trudeau received applause from an audience of the intellectually suffering at something called the “Global Citizen Now” panel discussion on the sidelines of the G20 Leaders’ Summit in Rio.

Much appreciation for the first short video below to Opposition Leader Pierre Poilievre who shared his ferocious reaction to Trudeau’s anti-human comments, challenging the current PM to call an immediate election.

Or course there will be no quick election call. To Justin, it’s more important to cling to the undercarriage of a taxpayer funded jet so he can fly the globe stunning audiences unfortunately already stunned by their utter terror of losing the planet.

In their horror at their inability to turn the switch off and let us all freeze/starve to death this winter, they applaud lovingly for their intellectual leader/sock model as he describes how hard it is to convince angry, hungry people they really need to suck it up.

If only he read a history book.. any history book.. apologies, any book at all. Truly even spending some time with the literary version of an Al Gore video rant would at lest keep JT occupied so he couldn’t speak for a few moments. I’m pretty sure every time he opens his mouth, the temperature in Canada rises as millions of frustrated hotheads (hello there) explode, spewing steam high up into the upper atmosphere where water particles do much more damage to our planet than the final exhaling of a non grocery-eating-planet-loving-Canadian.

Watch Pierre Poilievre’s video and assuage the ensuing headache by mapping out your route to a polling booth. If this doesn’t sell a couple of those ‘Axe the Tax’ shirts for the Poilievre team, well.. enjoy your stroll to the foodbank.

Here’s a link to his entire discussion. If you have a strong stomach and 20 minutes of your life to donate to a higher cause… No silly, not the intended cause of the anti-poverty group… But to the intellectual cause of understanding just how twisted the logic has become for those who fly around the world to wine and dine, only to break long enough to tell us they think it’s perfectly fine if we can’t buy groceries for our kids.

By the way, please save a bit of your shock and disappointment for the hapless host of the ‘anti-poverty’ Global Citizen. This was apparently on the sidelines of a G20 Summit.  I would expect this drivel to be called out at a respectable middle school debate. Apparently the ‘anti-poverty’ Global Citizen people aren’t overly concerned with poverty. Do we need to say that not being able to afford groceries is in fact THE definition of poverty?  Or course not. It would be much easier for them to change their name to Former Global Citizens.

You were warned.

Prime Minister Justin Trudeau sits down for a conversation with Michael Scheldrick, co-founder of the anti-poverty group Global Citizen, on the sidelines of the G20 Leaders’ Summit Rio de Janeiro, Brazil.

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