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Investing In A Pandemic World

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Investing In A Pandemic World

Launching an investment column in the midst of the biggest economic meltdown in investment history is a peculiar thing to do, and yet, here we are. Actually, the timing may be excellent: given the parameters and objectives of this column – how not to invest, as much as how to invest – what better time to wade in? If you’re a seasoned investor, the past few months most likely have you huddled in the basement under the stairs, sucking your thumb and rocking back and forth. The market has been pounded, and justifiably so – the strategy of governments to contain COVID-19 involves essentially shutting down large sectors of the economy. One can easily surmise that industries like tourism, air travel, etc. will be in big trouble; the problem is determining how far the rot goes – if an airline fails, or many of them, what industries does it take down with it? In a highly interconnected world, the answers are not clear.

Rather than panic and throw in the towel though (as some investors appear to have done), it is wise to stop hyperventilating if you can and consider the landscape without the lens of panic. First, the pounding in the stock market simply erased the extraordinary gains made in the past several years. As of writing, the S&P 500 Index ETF (exchange traded fund, which invests in a basket of stocks that mirrors the S&P 500 companies on behalf of individuals) is now back at a level of two years ago. Today’s data point might look like a disaster relative to the value of the portfolio 4 months ago, but that paper gain to the end of 2019 was a bit suspect anyway and most expected a market correction of some kind. Not quite like this one of course, but of some kind.

Second, governments around the world now have an arsenal of tools with which to stabilize economies. Or, more like they have a variety of smaller tools and one really big one: a great big freaking printing press to crank out money and shovel into the economy’s engines. There are many arguments as to why this is a bad idea in the long run, and they may all be right, but over the past few decades these strategies have become the norm. Government-led monetary tinkering, on ever-larger scales, saved the financial world in the 2008-9 Great Recession by flooding the world with bank-stabilizing money, and that success convinced those central bankers that this tool has no practical limits. The world is now so interlinked and dependent on central bankers’ policies that shouting about how they will destroy the financial world eventually is like a dog barking at a car. We need to think and act as though these policies aren’t going away. Because they’re not.

Governments, in this consumption-based world, can see the perils of allowing huge swathes of the global economy to perish. We may sneer = at a consumer-based culture, but we wet our pants when we consider the alternative. We need to learn to do things as cleanly as possible, but nowhere in the world does anyone want to see tourism grind to a halt, or people stop buying automobiles, or cosmetics, or any other mainstay of our economy.

As a result, those central banks and governments won’t let it happen. They will pump in money, and they will ease restrictions as soon as possible to get things back to work. It is a challenging time to consider putting money in the stock market (if you’re lucky enough to have some, and a job to boot), but some great companies are on sale in a huge way now. We can see, for example, that anything to do with the food/medicine/distribution systems is of critical importance. Given the fact that governments will print money to shove at anything the general population can’t live without, it is safe to assume those sectors will pull through. Same as natural gas and other industrially-critical materials – the whole climate change narrative has been stuffed in a trunk for the time being. No one wants to face next winter with a natural gas industry that’s gone out of business.

There is of course risk that the markets would continue to fall, based on the fact that there is so much uncertainty in the world with respect to demand erosion and recovery timing. But if the big blue-chip companies that provide our industrial lifelines go defunct and irreparably damage your portfolio, well, we’ll all have much bigger problems to worry about.

 

For more stories, visit Todayville Calgary

Before Post

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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Business

Saskatchewan becomes first Canadian province to fully eliminate carbon tax

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From LifeSiteNews

By Clare Marie Merkowsky

Saskatchewan has become the first Canadian province to free itself entirely of the carbon tax.

On March 27, Saskatchewan Premier Scott Moe announced the removal of the provincial industrial carbon tax beginning April 1, boosting the province’s industry and making Saskatchewan the first carbon tax free province.

“The immediate effect is the removal of the carbon tax on your Sask Power bills, saving Saskatchewan families and small businesses hundreds of dollars a year. And in the longer term, it will reduce the cost of other consumer products that have the industrial carbon tax built right into their price,” said Moe.

Under Moe’s direction, Saskatchewan has dropped the industrial carbon tax which he says will allow Saskatchewan to thrive under a “tariff environment.”

“I would hope that all of the parties running in the federal election would agree with those objectives and allow the provinces to regulate in this area without imposing the federal backstop,” he continued.

The removal of the tax is estimated to save Saskatchewan residents up to 18 cents a liter in gas prices.

The removal of the tax will take place on April 1, the same day the consumer carbon tax will reduce to 0 percent under Prime Minister Mark Carney’s direction. Notably, Carney did not scrap the carbon tax legislation: he just reduced its current rate to zero. This means it could come back at any time.

Furthermore, while Carney has dropped the consumer carbon tax, he has previously revealed that he wishes to implement a corporation carbon tax, the effects of which many argued would trickle down to all Canadians.

The Saskatchewan Association of Rural Municipalities (SARM) celebrated Moe’s move, noting that the carbon tax was especially difficult on farmers.

“It puts our farming community and our business people in rural municipalities at a competitive disadvantage, having to pay this and compete on the world stage,” he continued.

“We’ve got a carbon tax on power — and that’s going to be gone now — and propane and natural gas and we use them more and more every year, with grain drying and different things in our farming operations,” he explained.

“I know most producers that have grain drying systems have three-phase power. If they haven’t got natural gas, they have propane to fire those dryers. And that cost goes on and on at a high level, and it’s made us more noncompetitive on a world stage,” Huber decalred.

The carbon tax is wildly unpopular and blamed for the rising cost of living throughout Canada. Currently, Canadians living in provinces under the federal carbon pricing scheme pay $80 per tonne.

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Automotive

Electric cars just another poor climate policy

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From the Fraser Institute

By Bjørn Lomborg

The electric car is widely seen as a symbol of a simple, clean solution to climate change. In reality, it’s inefficient, reliant on massive subsidies, and leaves behind a trail of pollution and death that is seldom acknowledged.

We are constantly reminded by climate activists and politicians that electric cars are cleaner, cheaper, and better. Canada and many other countries have promised to prohibit the sale of new gas and diesel cars within a decade. But if electric cars are really so good, why would we need to ban the alternatives?

And why has Canada needed to subsidize each electric car with a minimum $5,000 from the federal government and more from provincial governments to get them bought? Many people are not sold on the idea of an electric car because they worry about having to plan out where and when to recharge. They don’t want to wait for an uncomfortable amount of time while recharging; they don’t want to pay significantly more for the electric car and then see its used-car value decline much faster. For people not privileged to own their own house, recharging is a real challenge. Surveys show that only 15 per cent of Canadians and 11 per cent of Americans want to buy an electric car.

The main environmental selling point of an electric car is that it doesn’t pollute. It is true that its engine doesn’t produce any CO₂ while driving, but it still emits carbon in other ways. Manufacturing the car generates emissions—especially producing the battery which requires a large amount of energy, mostly achieved with coal in China. So even when an electric car is being recharged with clean power in BC, over its lifetime it will emit about one-third of an equivalent gasoline car. When recharged in Alberta, it will emit almost three-quarters.

In some parts of the world, like India, so much of the power comes from coal that electric cars end up emitting more CO₂ than gasoline cars. Across the world, on average, the International Energy Agency estimates that an electric car using the global average mix of power sources over its lifetime will emit nearly half as much CO₂ as a gasoline-driven car, saving about 22 tonnes of CO₂.

But using an electric car to cut emissions is incredibly ineffective. On America’s longest-established carbon trading system, you could buy 22 tonnes of carbon emission cuts for about $660 (US$460). Yet, Ottawa is subsidizing every electric car to the tune of $5,000 or nearly ten times as much, which increases even more if provincial subsidies are included. And since about half of those electrical vehicles would have been bought anyway, it is likely that Canada has spent nearly twenty-times too much cutting CO₂ with electric cars than it could have. To put it differently, Canada could have cut twenty-times more CO₂ for the same amount of money.

Moreover, all these estimates assume that electric cars are driven as far as gasoline cars. They are not. In the US, nine-in-ten households with an electric car actually have one, two or more non-electric cars, with most including an SUV, truck or minivan. Moreover, the electric car is usually driven less than half as much as the other vehicles, which means the CO₂ emission reduction is much smaller. Subsidized electric cars are typically a ‘second’ car for rich people to show off their environmental credentials.

Electric cars are also 320440 kilograms heavier than equivalent gasoline cars because of their enormous batteries. This means they will wear down roads faster, and cost societies more. They will also cause more air pollution by shredding more particulates from tire and road wear along with their brakes. Now, gasoline cars also pollute through combustion, but electric cars in total pollute more, both from tire and road wear and from forcing more power stations online, often the most polluting ones. The latest meta-study shows that overall electric cars are worse on particulate air pollution. Another study found that in two-thirds of US states, electric cars cause more of the most dangerous particulate air pollution than gasoline-powered cars.

These heavy electric cars are also more dangerous when involved in accidents, because heavy cars more often kill the other party. A study in Nature shows that in total, heavier electric cars will cause so many more deaths that the toll could outweigh the total climate benefits from reduced CO₂ emissions.

Many pundits suggest electric car sales will dominate gasoline cars within a few decades, but the reality is starkly different. A 2023-estimate from the Biden Administration shows that even in 2050, more than two-thirds of all cars globally will still be powered by gas or diesel.

Source: US Energy Information Administration, reference scenario, October 2023
Fossil fuel cars, vast majority is gasoline, also some diesel, all light duty vehicles, the remaining % is mostly LPG.

Electric vehicles will only take over when innovation has made them better and cheaper for real. For now, electric cars run not mostly on electricity but on bad policy and subsidies, costing hundreds of billions of dollars, blocking consumers from choosing the cars they want, and achieving virtually nothing for climate change.

Bjørn Lomborg

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