Despite the current COVID-19 and oil/gas malaise, Alberta has survived and eventually prospered after every economic downtown since it became a province in 1905, and even before that, through the boom-bust cycles of the 19th Century fur trade totally dependent on the whims of European haberdashery.
“Of course we’ll recover,” says a retired friend. “But will I be around to see it?”
BUY AT THE BOTTOM, SELL AT THE TOP
The bad news is the stock market crash a few weeks ago. The good news – never talked about – are the careful investors who kept a chunk of their holdings in cash and are now happily buying blue-chip stocks at a fraction of their 2019 prices.
For all the complexities, stock market investment follows a predictable pattern. When markets crash and company revenues falter, good companies become investor bargains. Meanwhile, over-extended companies (i.e. ones that borrowed too much money) go bankrupt and are sold at fire-sale prices to companies with money in the bank.
WHAT JUSTIN TRUDEAU SHOULD BE DOING
The worst news is our own Canadian government in far-off Ottawa, conspiring to sink the nation’s biggest industry.
The oil and gas industry is rightly being compared to Ontario’s auto-manufacturing industry in the debt/recession crisis of 2009.
At that time GM Canada and Chrysler were caroming towards bankruptcy. The federal governments lined up $9 billion and the Ontario government another $5 billion in loans, grants, and 2% ownership of Chrysler to keep car assembly plants in Windsor and Brampton open, to save 8,000 jobs.
This time around, you would think Prime Minister Justin Trudeau would be moving heaven and earth to get new pipelines built as fast as possible, creating jobs, saving 100,000 already-lost jobs, and creating on-going revenues.
But the Little Prince’s government is so deep into anti-fossil-fuel rhetoric that the best it can do is $1.7 billion for non-wealth-producing environment clean-up, i.e. abandoned well remediation and $750 million to be used specifically to lower methane gas emissions.
Year, cleaning up abandoned wells is a good thing and over-due. And it will soak up a few thousand unemployed oil and gas workers.
But it does not directly help oil and gas-related businesses that are staring bankruptcy in the face through no fault of their own. The federal government has said some credit support for mid-sized energy companies (as Canadian banks are doing without government backing … yet) will be forthcoming.
After so many years of indifference, nay, open hostility to the oil and gas industry – including no acknowledgment whatsoever of the contributions Canada’s oil and gas can make to a cleaner world – it is clear Alberta’s of a full recovery are nil-to-none as long as this government is in power.
Our hope has to lie in the Conservatives picking a smart, visionary, pragmatic and charismatic leader who can convince a majority of Canadians that economic growth must be the federal government’s #1 priority, that Justin Trudeau’s beloved Brave New World of identity, gender, and climate policies should go on the back burner until such time as the economy can afford such frivolity.
AIMCO DOING THE BEST JOB IT CAN
Give AIMCo a break!
Over the past 10 years, the investment management company (a provincial crown corporation investing provincial pension funds, the Heritage Savings Trust Fund, and other funds on behalf of Alberta) has achieved an excellent average return on investment of 8.2 per cent per year.
Anybody investing within a Registered Retirement Savings Plan or a Tax-Free Savings Program would be ecstatic at an 8 per cent-plus return over the past 10 years!
So AIMCo lost $4 billion in some investment strategy in the first quarter. That is 3 per cent of its total nut, knowingly placed in a high-risk/high-reward investment. The most conservative of investors usually place a small percentage of investment funds in higher-risk investments, investments at the “tip” of the classic investment pyramid. Every single crown-owned pension fund in Canada and the world would be following similar investment risk strategies.
They could all theoretically invest in nothing but government-backed bonds or treasury bills … but that would not earn enough money to ensure the on-going viability of their pension funds.
I could not help but snort coffee through my nose as NDP leader Rachel Notley was being so self-righteous and indignant about the governing UCP party and its AIMCo fund management.
Her 2015 to 2019 government put AIMCo at far more risk by imposing Alberta-first political priorities on its investment practices and loading up its board with unqualified directors.