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

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5 minute read

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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2025 Federal Election

Carney’s budget is worse than Trudeau’s

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By Gage Haubrich

Liberal Leader Mark Carney is planning to borrow more money than former prime minister Justin Trudeau.

That’s an odd plan for a former banker because the federal government is already spending more on debt interest payments than it spends on health-care transfers to the provinces.

Let’s take a deeper look at Carney’s plan.

Carney says that his government would “spend less, invest more.”

At first glance, that might sound better than the previous decade of massive deficits and increasing debt, but does that sound like a real change?

Because if you open a thesaurus, you’ll find that “spend” and “invest” are synonyms, they mean the same thing.

And Carney’s platform shows it. Carney plans to increase government spending by $130 billion. He plans to increase the federal debt by $225 billion over the next four years. That’s about $100 billion more than Trudeau was planning borrow over the same period, according to the most recent Fall Economic Statement.

Carney is planning to waste $5.6 billion more on debt interest charges than Trudeau. Interest charges already cost taxpayers more than $1 billion per week.

The platform claims that Carney will run a budget surplus in 2028, but that’s nonsense. Because once you include the $48 billion of spending in Carney’s “capital” budget, the tiny surplus disappears, and taxpayers are stuck with more debt.

And that’s despite planning to take even more money from Canadians in years ahead. Carney’s platform shows that his carbon tariff, another carbon tax on Canadians, will cost taxpayers $500 million.

The bottom line is that government spending, no matter what pile it is put into, is just government spending. And when the government spends too much, that means it must borrow more money, and taxpayers have to pay the interest payments on that irresponsible borrowing.

Canadians don’t even believe that Carney can follow through on his watered-down plan. A majority of Canadians are skeptical that Carney will balance the operational budget in three years, according to Leger polling.

All Carney’s plan means for Canadians is more borrowing and higher debt. And taxpayers can’t afford anymore debt.

When the Liberals were first elected the debt was $616 billion. It’s projected to reach almost $1.3 trillion by the end of the year, that means the debt has more than doubled in the last decade.

Every single Canadian’s individual share of the federal debt averages about $30,000.

Interest charges on the debt are costing taxpayers $53.7 billion this year. That’s more than the government takes in GST from Canadians. That means every time you go to the grocery store, fill up your car with gas, or buy almost anything else, all that federal sales tax you pay isn’t being used for anything but paying for the government’s poor financial decisions.

Creative accounting is not the solution to get the government’s fiscal house in order. It’s spending cuts. And Carney even says this.

“The federal government has been spending too much,” said Carney. He then went on to acknowledge the huge spending growth of the government over the last decade and the ballooning of the federal bureaucracy. A serious plan to balance the budget and pay down debt includes cutting spending and slashing bureaucracy.

But the Conservatives aren’t off the hook here either. Conservative Leader Pierre Poilievre has said that he will balance the budget “as soon as possible,” but hasn’t told taxpayers when that is.

More debt today means higher taxes tomorrow. That’s because every dollar borrowed by the federal government must be paid back plus interest. Any party that says it wants to make life more affordable also needs a plan to start paying back the debt.

Taxpayers need a government that will commit to balancing the budget for real and start paying back debt, not one that is continuing to pile on debt and waste billions on interest charges.

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2025 Federal Election

As PM Poilievre would cancel summer holidays for MP’s so Ottawa can finally get back to work

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From Conservative Party Communications

In the first 100 days, a new Conservative government will pass 3 laws:

1. Affordability For a Change Act—cutting spending, income tax, sales tax off homes

2. Safety For a Change Act to lock up criminals

3. Bring Home Jobs Act—that repeals C-69, sets up 6 month permit turnarounds for new projects

No summer holiday til they pass!

Conservative Leader Pierre Poilievre announced today that as Prime Minister he will cancel the summer holiday for Ottawa politicians and introduce three pieces of legislation to make life affordable, stop crime, and unleash our economy to bring back powerful paycheques. Because change can’t wait.

A new Conservative government will kickstart the plan to undo the damage of the Lost Liberal Decade and restore the promise of Canada with a comprehensive legislative agenda to reverse the worst Trudeau laws and cut the cost of living, crack down on crime, and unleash the Canadian economy with ‘100 Days of Change.’ Parliament will not rise until all three bills are law and Canadians get the change they voted for.

“After three Liberal terms, Canadians want change now,” said Poilievre. “My plan for ‘100 Days of Change’ will deliver that change. A new Conservative government will immediately get to work, and we will not stop until we have delivered lower costs, safer streets, and bigger paycheques.”

The ’100 Days of Change’ will include three pieces of legislation:

The Affordability–For a Change Act 

Will lower food prices, build more homes, and bring back affordability for Canadians by:

We will also:

  • Identify 15% of federal buildings and lands to sell for housing in Canadian cities.

The Safe Streets–For a Change Act 

Will end the Liberal violent crime wave by:

The Bring Home Jobs–For a Change Act 

This Act will be rocket fuel for our economy. We will unleash Canada’s vast resource wealth, bring back investment, and create powerful paycheques for workers so we can stand on our own feet and stand up to Trump from a position of strength, by:

Poilievre will also:

  • Call President Trump to end the damaging and unjustified tariffs and accelerate negotiations to replace CUSMA with a new deal on trade and security. We need certainty—not chaos, but Conservatives will never compromise on our sovereignty and security. 
  • Get Phase 2 of LNG Canada built to double the project’s natural gas production.
  • Accelerate at least nine other projects currently snarled in Liberal red tape to get workers working and Canada building again.

“After the Lost Liberal Decade of rising costs and crime and a falling economy under America’s thumb, we cannot afford a fourth Liberal term,” said Poilievre. “We need real change, and that is what Conservatives will bring in the first 100 days of a new government. A new Conservative government will get to work on Day 1 and we won’t stop until we have delivered the change we promised, the change Canadians deserve, the change Canadians voted for.”

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