June 14 Episode
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Welcome to Money Talks. My name is Mike Campbell. I'm glad you're here. I've got Lance Roberts with us, and he's got some fascinating takes on, well, the U.S. deficit. Is it as big a problem as most people think? Well, that depends. He'll tell us specifically on what, and that also creates other opportunities. He'll tell us in what aspects and areas of the market will do that. I

I've got Ozzy asking, and I'm asking Ozzy, are we going to return to allowing foreign buyers into our market? Because we've got a big problem with a lack of buyers in real estate today. I've got Rob Levy joining me. Some interesting thoughts from one of the head of Canada's banks about how we can help out young Canadians. And we need to be doing that. Plus, I've got a goofy award for you. I've got a quote of the week. That's fascinating. It's from 250 years ago, and you feel like it was written yesterday. But first,

Last week, I asked Andrew Rulon of Integrated Wealth Management about something that's been on my mind for months with all the talk about Alberta independence. I asked if he thought the push for independence would diminish if the federal government would send a clear message that it would support a new pipeline, either at West or East. I asked because my bet is that

It would make a huge difference. But Prime Minister Carney and the Liberals refused, at least at first, to give a straight answer. They wanted to play both sides of the fence coming into the election, even going so far as to say one thing in English and another on French TV. But now the answer is clear. There will be no new pipeline, period, because the Prime Minister has stated that provinces have the veto power. Knowing full well that Quebec Premier Legault and BC Premier David Eby

have stated unequivocally that there's not going to be any new pipelines. You know, in passing Bill C-5, Prime Minister Carney was asked, point blank,

Say there's a pipeline project you believe in the national interest, but there's a province like Quebec or BC that doesn't want it. Are you going to push it through anyways? The prime minister replied, no, and went on to say, if a province doesn't want to, it's impossible. Well, actually, it's not impossible. The federal government can declare an interprovincial pipeline in the national interest and overrule provincial opposition under the Constitution Act of 1867 that's been reaffirmed by the Supreme Court. So he can do it.

But it's no surprise, given Prime Minister Carney has no interest. He's opposed fossil fuels for decades. He's a co-founder of Net Zero Agenda, supported the Liberals' decade-long opposition to fossil fuels under Justin Trudeau. He supported, along with every returning Liberal MP, cancellation of Northern Gateway, the Northern Tanker Ban, Bill C-69, nicknamed the No More Pipelines Bill,

along with the regulatory roadblocks to discourage development of the Energy East pipeline.

I mean, come on, it took a heaping helping a whistle thinking to believe that the federal liberals would support a new pipeline east or west. We've just been going through the motions so they could place blame on the provinces. On a cost-benefit analysis, it actually makes no sense to have no pipelines. I mean, if Canada's entire oil and gas industry was shut down, it would reduce global emissions by 0.49 to 0.51%.

while costing Canada literally trillions of dollars in GDP, tens of billions in government revenue, along with thousands of jobs. I mean, the oil sands alone contribute only 0.12 of a percent of global emissions. As Chrystia Freeland famously told the Financial Times, even if all Canadians stopped emitting carbon, we wouldn't move the dial.

But cost-benefit analysis to determine the most effective way to reduce emissions has regularly been trumped by virtue signaling. So it's no surprise that the federal government is ignoring experts like Heather Exner Perot. She's the Director of Energy, Natural Resources and Environment at the Madonna Laurier Institute, who warns that Canada is facing a pipeline capacity shortfall as early as 2027.

And she urges immediate planning for a Trans Mountain pipeline expansion and a new pipeline akin to Northern Gateway. I mean, there's lots to discuss in this, but that's not my question today. My question is, is Mark Carney and the federal liberals really prepared to further fuel the call for Alberta independence in exchange for no material benefit other than the global climate agenda while paying a price that literally no other oil producing country on the planet is paying?

Mark Carney and the Liberals have not made a convincing argument as to why trillions of GDP, thousands of jobs, billions in government revenue should be forgone with so little to be gained in terms of emissions reductions.

Way too many people, though, in eastern Canada, including in the media, dismiss this anger and frustration of Albertans who see a huge economic opportunity sabotaged for the global climate agenda. Clearly, they disagree. But I'll tell you what, they should not be so casually dismissed by those people living in the east, especially if you consider where this could lead.

Hey, just a reminder, sign up for five minutes with Mike by going to mikesmoneytalks.ca. It's absolutely free, tons of great information. And I want to say a big thanks to all of those people who bid on our special Olympics auction, all of the people who donated some wonderful items. Really, I couldn't say, I just can't be more grateful for it. So good on you and thank you.

I always love to get a chance to talk with Lance Roberts. You know him as Chief Strategist for RIA Advisors, a host of The Real Investment Show. And I encourage you to tune into that. Lance, appreciate you taking time today. I mean, we could have talked though anytime in the last few months and it's like, this is the best time to talk. I mean, there's just been so much happening. Yeah.

And, you know, and of course, a huge concern in Canada is tariffs and, you know, and our counter tariffs, etc. Market has that massive reaction to it. And it's sort of like if I had been asleep for that whole period of time, I'd wake up and go, what's your point? So maybe just, you know, give the overlay of your perspective. Well, you know, it's been it's been very interesting because, you know, it's interesting.

You know, we talk a lot, you and I have talked a lot in the past about emotional biases and how those affect our investing outcomes and all these types of things. And, you know, it's interesting, the most pressing question I was getting back in April was, oh my God, when is this sell-off ever going to end? I mean, it's just, you know, we're just down every day. Trump's ruining everything. The tariffs are terrible. And then April the 9th,

the markets take off. We have the biggest one-day rally in recent history. And since then, the market's up 20% from the lows. And now the question I'm getting is like, oh my gosh, when's this rally ever going to end? It just won't stop. And I got out of the market. Now I need to get back in and it just won't give me a break. So, you know,

So, you know, it's very interesting how quickly, and I've been writing a lot of articles lately, Mike, about narratives. There's so many narratives in the markets. You know, it's the reason the market's doing this is because of tariffs or the debt or the deficit or whatever it is. And these narratives generally have very little lasting impact on markets because markets adapt to them and then start to look forward. And again, markets are always forward looking. So

And it's tough for investors because they get swept up into these narratives that are big, scary things, and they lose track of what's actually happening in the markets. And you're so right. I've certainly been getting those same questions, though. You know, gee, not so much shouldn't I have got out because there was so much uncertainty, but should I get in? You know, it's sort of that whiplash. Yeah.

You know, and as you say, I love your point about the narratives, because this week's narrative or last week's narrative is, you know, you've got two trillion in interest payments. And, you know, I'm not saying that's not significant, but is it market significant, you know, as we go forward here? Well, again, you know, the debt and the debt is that's that's got a lot of headlines lately. You know, of course, President Trump's trying to pass this big, beautiful spending bill.

And the CBO, the Congressional Budget Office, came out and said that's going to add like $2 trillion to the debt over 10 years. And you've got a lot of people coming out now. Ray Dalio is the most famous, I guess, as of late, talking about a financial crisis right around the corner.

I just wrote an article about him in particular because he was saying the same thing in 2010, 2011, 2015, 2018. And every year it's this crisis right around the corner. One of the most interesting things in that article is he was asked in an interview, he says, what's the biggest mistake you ever made? And this is really key for investors.

to pay attention to. He says, what's the biggest mistake you ever made, speaking to Ray Dalio, in your investing creations? Well, in 1980, 81, I was predicting a depression in the U.S. economy.

And of course, that never happened. And so for people that are looking at these more dire outcomes, what's really important to understand is when you're seeing a headline narrative like the debt and the deficit, and particularly about the CBO, which doesn't take into account any future growth, any revenue from tariff collections, any potential changes to regulation or regulatory reform, none of that's included in their forecast. It just takes the current baseline, runs it out to infinity.

It's important to understand that things change. And more importantly, markets adapt to what's happening in markets and begin, as I said earlier, they begin to look forward. Well, OK, I understand the debt. The debt's a problem. But going forward, what does that mean? And one of the biggest things we can talk about this if you want. But one of the biggest changes that we've got coming into the U.S. economy and to Canada as well.

is going to be the advent of AI. And what I don't mean by the advent of, you know, chat GPT, that's here. What we're talking about is the infrastructure requirements needed to build out AI. And it is absolutely beyond most people's comprehension how much money's got to be spent on building out data centers and power.

Your point's so well taken, though, because first of all, understanding those statistics, they are straight line statistics. And we've had these two incredible events. For example, in the last, I don't know, 2008, we had the great financial reset or whatever we wanted to call that recession. But we had COVID. That certainly wasn't on anybody's playbook and it wasn't on the parliamentary budget office's playbook or the congressional budget office playbook.

And now AI wasn't really on the playbook either in the way that people are hoping for the productivity explosion. And I would say, again, it's very difficult to factor all those in. And then I think it's understandable. But then the individual investor stands back and go, OK, now what? You know, I mean, well, I've been a long term bull.

Since 2009, I've got the article I wrote. I've got that. Never backed away from the U.S. story, especially Canada's been a different story because of

you know, different factors. Our government isn't as keen on economic growth or hasn't been for 10 years, you know, and look at the, we don't have that exposure to tech as a result of some of that, you know, so, and it still seems to me, the U S is still going to be the leader in all of those things. And you mentioned AI and that seems to be where the progress there were,

We're hoping for progress there. Well, again, for me, it's not so much about what AI can do. I mean, that's important, right? AI is going to massively increase productivity in a variety of different areas. But that's not the key thing I'm looking on. And particularly, we're talking about the debt and the deficit. Because right now, the US government has $37 trillion in debt. That's the big scary number, right? It's like, oh my gosh, we have all this debt. Well, the problem with the current debt level is twofold. One is the interest payments, as you talked about.

And that's a lot right now because interest rates are relatively elevated. This is also another problem with the CBO projections. It doesn't adjust for potentially lower rates in the future and what that means for interest rate service. If the Fed cuts by 1%, which they will at some point, that's going to lower the deficit requirement by $500 billion or more. So immediate changes can occur just by lower interest rates, but that's still not even what I'm looking at.

What I'm looking at is the fact that you've already got $1.8 trillion worth of commitments to build out AI data centers from companies like Meta, Apple, Amazon, Microsoft, others. These data centers require a massive amount of energy, and you can't get the energy they need from solar and wind and those type of things. They don't produce enough. They're not efficient enough.

So we just saw recently that META cut a deal with Constellation Energy Group, CEG is the symbol for that company, to buy all the nuclear power they can produce for 20 years to power their data centers. Amazon just cut a deal and is building a facility, an AI data center in Pennsylvania and is cutting a deal with Talon Energy to buy all of the nuclear energy that Talon Energy can produce. And

And these are massive. These data centers require up to 10 gigawatts of power to generate all the AI that's going to be going forward. So when you start looking at these buildouts, we're going to be building 50 to 100 data centers going forward. So now I need power for all of that. Well, that's going to have to require either natural gas or nuclear power.

And this is why you're seeing nuclear power stocks run right now, like Occo and Oclo and CCJ, Comico, GE, Vernova. One of the stocks that we own has been doing great because they build up nuclear power plants.

Every $1 billion, and this is now back to the debt, right? So you're going to build out 50 to 100 of these data centers. Each one of those are going to require massive amounts of power to generate the amount of power to generate the output of all that data computation.

You're talking about $7 to $8 trillion invested. Every dollar generates $3 of economic activity because of the multiplier effect of infrastructure. So now you're talking about a $25 trillion economy generating roughly about $20 trillion worth of economic growth over 10 years.

All of a sudden, your growth rate of the U.S. economy goes from two and a half to three percent to three and a half percent. Your debt to GDP is going to fall from 120 percent to 100 percent. So you're going to solve a lot of your deficit debt problems through economic growth in the future because of the infrastructure demand needed to build out the future of AI. And that's the one thing I think a lot of people are overlooking.

Well, and I'm thinking also, I mean, it's almost a cliche, it's just, you know, but we didn't anticipate the impact of the internet. And this is even faster. I mean, this timeframe is shorter, but we didn't anticipate, you know, everything around that and cell phones. You know, I was in 2000, I was the one holding the shoe box, you know, yeah, you

You know, so your point's so well taken that it's difficult to anticipate the positive there, although there's a consensus that it's certainly going to be one. You know, and then I love your point about, okay, so if we're going to do that, what does it mean? And I'm hearing loud and clear, nuclear there. That's a favorite. I'm saying that because that's a favorite of Money Talk since 2001, you know, is uranium, et cetera. So am I safe to say that that's one of the things that you've been –

recommending to, you know, RIA advice. Yeah, yeah. So, you know, right now we've got a position in GE Vrnova, which is, you know, in that build out of that plant. We also own companies like, so when you think about power, right?

I have a nuclear power plant, but I have to deliver that power somehow. Right. So now I've got to build out the electric grid and we have a very outdated electric grid in the U.S. economy that's got to be upgraded to handle the amount of data of power requirements needed for. And again, it's not just for AI. You know, Bitcoin requires, you know, Bitcoin mining requires a tremendous amount of power for some type of future and cryptocurrency. Right.

that's going to require even more power. And then think about all the computers, the robotics that are coming. We're going to have a robot in every household, supposedly. More electric cars, whatever those are going to look like. President Trump's trying to push through legislation to fast track electric flying cars. All that requires more and more power. And we can have all the power in the world, but if you can't deliver it through an electrical grid,

You've got problems, right? And so one of the things we're going to have to build out, and this is why infrastructure is going to be so important, is not just the power plant itself. It's also the grid. And then if I'm going to build a grid, I've got to build roads and bridges. I've got to build houses for the workers to live in. I've got to build the infrastructure around those areas of construction to support the workers. And so this is why there's such a big multiplier effect.

on infrastructure spending versus building out of services. And, you know, talking about the internet, the internet was great, right? We had a lot of people don't remember. We had to go in, dig up a bunch of old, you know, under underground pipelines. We ran optical cable through them so we could deliver the internet, but that was minor, minor,

compared to the amount of infrastructure requirement needed to build out the necessary support structure for the power demands that's coming over the next 10 years for AI. And this isn't something that's like 50 years from now. This is by 2030, 2035, we're going to have to build out this infrastructure if we're going to have the AI delivery that everybody's hoping for.

Are you finding the political recognition of that? You mentioned, of course, President Trump's been talking, but is that bipartisan when people look at that? I mean, the numbers should be bipartisan. You know what I mean? But I'm just not sure, you know, politically how it's playing out in the States. Look, you can talk to me more about political partisanship in Canada than the U.S. is the same way. You know, we could find a cure for cancer and there's going to be a whole side of the, you know, the political parties are going to oppose it, right? Just because...

You know, who's the president? And it's unfortunate we've gotten in that, you know, that position. Because what politicians are supposed to do is what's best for the country, what's best for the citizenry, what's best for the wealth of the economy. And we've gotten so far divided between, you know, political ideologies versus really what's best for the country. It's just it's it's it's hindering politics.

the American public from being as prosperous as it could be. And hopefully that will change. There really should be no argument on building out the necessity

for the U.S. economy for AI. You should put up a bill for that and it should pass with 100% support on both sides because that's good for everybody. That's not going to happen. It's going to be a huge fight just because they don't like it. One side doesn't like who's president. That'll change. Then the other side's not going to like who's president. So, you know, this is going to be a challenge we have to get through. But regardless of the government, private sector is going to make this happen one way or the other because they need it. Yeah.

You know, it's fascinating to see. We're having a similar debate in Canada, but it's over oil, as you know. You know, being from Texas, you appreciate that. You know, and the...

Yeah, I opened with a commentary on that, that, you know, it's just too emotional an issue right now. You know, it's led to talk of separation or independence rather from Alberta, etc. So, yeah, I think we're well aware of how politics can supersede, you know, practical reality, you know, or economic, I should have said, financial and economic reality. Just call it what it is, logic.

Yeah. There you go. Good. I'll be in trouble. Exactly. And welcome it. By the way, I welcome it because it's very, very, very, very puzzling. But it is fascinating to see then, you know, the one thing that's fascinating

sort of interesting about the U.S. It's different than many countries, not all countries. But speaking of the deficit and speaking of the federal debt, it's all borrowed in U.S. dollars. They're not out there borrowing in euro or bar and, you know, with so many other countries are. And that's where the problem can be when there's a change in currency. But, you know, I mean, the Federal Reserve at any time can just step in and help. So when they say, what are the consequences of this?

My feeling is the only consequence is a diminished purchasing power of the currency because they're not running out of money because, you know, they can create it out of thin air. And again, you know, look, the dollar's been under pressure. And this has been one of the other big headlines, right? It's like the, you know, the loss of the reserve currency status, the dollar's going down because of this.

And what's interesting is if you actually just kind of back out on a chart a little bit, look at the dollar, it's in a nice upward trend ever since 1980. Dollar values go up and down because it's a relative balance to other currencies.

And we had a very, very big rally in the dollar from 2022 and 2023, big rally in the dollar. Dollar got really overbought relative to other currencies. Well, when that happens, that puts pressure on those economies. And so what they do then is start to

quote unquote, manipulate their currency to get that balance back in some type of ratio. Now we've kind of gone too far in the other direction. And the dollar weakness is now impairing exports out of our country to those countries as well. So again, the dollar is going to rally here at some point, and there'll be a reason for why the dollar is rallying. But just the reality is, is that 70% of all transactions still occur in dollars.

And at some point, that imbalance between currencies gets rectified. And one thing that will help the dollar is if the stock market continues to rally here, that's going to start to pull. So everybody's like, well, nobody wants to be in U.S. dollars or U.S. debt. We've had a tremendous amount of buying in U.S. treasuries by foreigners over the last year. So that kind of narrative is hogwash. But

What happens is when the U.S. stock market is falling and interest rates are going up, so bond prices are falling, if I'm a foreign country and I've got money stored, my reserve currency is stored in U.S. dollars, I'm going to pull that back because I'm losing money on my reserve currency. But at some point when those assets rally,

And this is why we've seen a lot of buying of gold, because I can take my reserve currency out of bonds, which is going down in price, buy gold because that was going up. So we saw a lot of central banks switching into gold for that reason, because they still needed to have that reserve currency balance for trade.

With the stock market rally, that's going to eventually start pulling more and more of that foreign currency back into U.S. dollars to be participating in the financial markets as it was before. And we'll start to see the dollar rally again. And that's just a function of currency balances around the world. And again, you know, as media people, we have to assign a reason to it. It's like, oh, it's going down or it's going up because of this reason or that reason. It's really just about reserve balances.

And about currency and trade exchange, because, again, if currencies get too far out of whack, it impairs trade for one country or the other. And it impairs that are one country more than the other. And it makes trade unfair and then things too expensive. And so things start to central banks will intervene to get those balances more back in line. So that's better economically for the country.

Let's come, by the way, you mentioned, I want to talk about gold for a moment. You know, you're looking at your portfolios. Do you have a recommendation of X amount in gold or you're not there or you want more or what? So it depends. So people often, you know, misunderstand me because I talk about gold from different perspectives.

We have portfolios that don't own any gold because they're structured in a certain manner. And we have probably 40 different portfolios that we run for clients. Some own gold, some don't. Some have different assets than other assets. Some have more equity, less equity, longer duration bonds versus shorter duration bonds. It all depends on what the objective of the portfolio is for that particular client.

So, you know, gold is an example. We have a portfolio, it's called the all weather model, and it's based on the permanent portfolio structure. So it has cash bonds, gold and stocks. And that gold performance has been very, very good. Gold has gotten very over, and I talked about this about two months ago.

I said gold has gotten very overbought. Look for a pullback in gold. And we just had a very nice pullback in gold recently. And our gold's trying to base along its bullish trend line. So, you know, it's done a good job of that. The one thing to be aware of, you know, historically speaking, we look at longer term charts. Gold is technically very extended from long term means.

Now, all that means is that the price run up has been abnormal relative to its normal trend of growth. That's all it means. It doesn't mean anything other than that. If we start to see a transition back into the stock market from foreign investors, they want to buy stocks, or if we start to see interest rates come down and U.S. Treasury starts to go up in value, gold is going to act as a liquidity source to take money out of to buy bonds. So if I'm a foreign bank,

And I've had my reserve currency stored in gold, which they've been doing over the last year. We've seen a lot of central banks buying gold. If we begin to see the transition back into U.S. treasuries, which will happen at some point,

then gold will become a liquidity source. That's not a bad thing. It just means gold will be going down in price. I'll take my reserve currency from that and I buy another asset that's going up in price. So in that portfolio that we have that has gold in it, we took profits about two months ago. We still own a good position. All we did was reduce it back down to target weight. That portfolio has a constant weighting in gold.

And so all we recommend for investors at this point is because we're kind of late in that game, is that if you've got a lot of weighting in gold, this is a good opportunity to maybe think about just kind of trimming back your exposure a bit to whatever your normal weighting is. If you normally have a 5% weight in gold and it's now 7% of your portfolio, bring it back down to 5%.

And then if we go through a transition period, which we will and we always do, then you'll have an opportunity to buy gold at a lot cheaper base at some point in the future.

And sorry, I know I'm hopping around, but people got questions and, you know, go to different categories. And certainly bonds have been fascinating. You know, one of the things that I've noted is you go back trying to explain to people that just because the Federal Reserve or the Canadian Central Bank makes a move doesn't mean the bond market agrees with it. You know, it's not automatic. And we saw that very, I think, vividly. I guess it was back in the last fall, September, November.

October, December, you had a half point rate cut in the States quarter quarter. And yet the 10 year bond went up over a percent, the yield on the 10 year. So, uh,

You know, I'm just wanting people to be aware. What do you feel about the bond market at this point? I mean, there is so much uncertainty out there. These are tough questions. There is a lot of uncertainty in the bond market. And here's what's interesting, though, is that part of this uncertainty in the bond market is that the U.S. I'm talking about the U.S. in general. The U.S. market got to the point where they thought zero interest rates were normal.

Right. Yeah. And that's not normal at all. Historically going back. Look, if you if you if you ask me right now, Mike, you said, Mike, you said, Lance, where should interest rates be in the U.S. economy? Four and a half percent. Why do you say that? Well, because economic growth is as to it is about two point two. Inflation is two point three. Add those together. That's four and a half. Historically speaking, going all the way back through history to the beginning of time, we started tracking inflation and economic growth.

There's a 95% correlation between the composite index of economic growth and inflation to interest rates. So right now, interest rates are trading about where they should be. And if you look back at the economy pre-2008, we just go back to pre-2008 before we started all this central bank intervention, interest rates were about 5%. Economic growth was roughly about 5% with inflation. So-

Interest rates have normalized. And all of a sudden we're going, oh, my gosh, this, you know, why are interest rates so high? They're not. They're just normal. But we got used to these abnormally low rates, which is not healthy for the economy. And it's not healthy for the average American to have rates at that low level because who on earth would invest capital?

For 30 years, if I'm, say I'm a home builder and I'm going to finance homes, why would I finance somebody's home at two, two and a half percent for 30 years? That makes no economic sense whatsoever, but we were doing it.

And so now we've got back to normal. So what's going to happen in the future is that as inflation slows, which it is, and as economic growth slows, which it is, then that rate's going to come down. We should probably be trading sometime next year, I would imagine, closer to 3% than 4.5%.

Let me finish with this. What's your biggest worry going out there? I know that's like Barbara Walters invaded my soul last night, but really, you know, does one thing just jump out? Okay, so there's sort of the scenarios out there. Is there one thing that, I mean, you know, for me, I don't like the geopolitical escalations going on in Europe, for example. Look, the thing, you know, I get asked that question a lot, like, what's the one thing keeping you up at night? Here's the problem with that question.

Anything I can think of and anything that you can think of is already priced into the market because the market has already thought about this stuff. What keeps me up at night is what am I missing? What's the one? And again, and right now people listening, it's like, well, I can name six, right? You're missing this and this and this. No, you've already thought about it and the market already has two. So anything that you can think of,

And anything you've read about has already been adopted by the market. The market knows about it. It's already adapted to it. So the thing that keeps me up at night is what could possibly happen that pops up that's on nobody's radar. It's not even in the world of possibility. A good example, just recently, April the 7th,

President Trump stands up there at the Rose Garden. He goes, hey, we're putting 38% tariffs on people. Nobody saw that coming, right? We were all expecting 10. That's the type of thing that gets you. And this is why maintaining a good balance in your portfolio is very important, not taking on too much risk, because you never know what's going to trip up the market. And so when you wake up that one morning and the market's down 3%,

Your portfolio is going to be down, but it'll be down one, one and a half percent because you've got some diversification, you've got some hedges, you've got some extra cash, those type of things. You've re- you know, just keep that balance, that risk and tolerance. And you can then

react rationally to what's going on. Is this a real event? Should I be buying here? Should I be selling, taking more off the table? But what happens for most investors is they have too much risk. The event happens. They're down so much. They freeze. They don't do anything. And then the market keeps pummeling them, you know, just as we saw in April until they eventually sell right at the bottom. And that's generally the bottom.

I think that's great advice, first of all, but I love, you know, your observation through 30 years and I'd certainly share it is asking myself, what am I missing here? And that happens also for me if there's a move that I didn't see coming either way, either direction I go. So what did I miss here? And I loved your point that the market's already factored in stuff.

You know, that something I haven't thought of or everything I've thought of, the market's already factoring it in. So I just think, and that leads to your advice about how to construct your portfolio. You know, I think if you talk to all of the great investors, you know, brand names, you know, obviously people like Warren Buffett, but Howard Marks, they always talk about humility.

And that's part of that humility. I don't know everything. I can't anticipate everything. My portfolio shouldn't pretend that it has. And I see that as just wonderful advice there. And Lance, you're also writing on Substack too, that I wanted to let people know. So is it just under your, it's just Lance Roberts? Yeah, Lance Roberts on Substack. It's at Lance Roberts on X. So I'm really easy to find. Just type my name in. Awesome.

How did you, on Substack, how did you ever come up with the name? It was a big challenge. Yeah. No, it's good stuff though. Very good stuff. Lance is the chief strategist for RA Advisors. He's the host of the Real Investment Show, but yeah. And what's

important about these markets and wonderful is that we can get updates from you by just going through those things because the market obviously and things are changing on such a rapid pace. But Lance, we appreciate you finding time for us. Great to see you. My pleasure. See you anytime.

Time now for the quote of the week. You know, I find it fascinating when we read observations that were made like 250 years ago that are as pertinent today as they were then. And that brings me to my quote of the week by David Hume, Scottish philosopher, historian, economist, who in the 1750s, 1750s, talked about government's pension for building up debt

Because it was politically more advantageous than raising taxes. Now, come on, that's pretty relevant today where the federal government, after never hitting a deficit target in 10 years, the prime minister is now promising $270 billion in new deficits by March 2030.

David Hume observed that governments prefer debt to taxes since the costs are hidden and intergenerational, enabling a prime minister, in Hume's words, to make a great figure during his administration without overburdening the people with taxes. The practice will therefore almost infallibly be abused by every government. Welcome to Canada 2025.

I'm going to bring Rob Levy in here right now. You know, Rob, one of the things that's been on my mind, well, for years, I think people could accuse me of being repetitive, but I worry about our young people. I think they've got a raw deal. We can go on and on about that, but I personally, and I can supply tons of numbers about that, whether we look at overall youth unemployment, whether we look at the amount of debt that's been made,

that they are going to have to pay for the rest of their lives, the interest payments on those. Look at the housing market, for goodness sakes. You know, we had a temporary visa explosion with no thought whatsoever on what the impact on housing. And again, we know it's a different situation. And I know I go on about it, but I was interested to see, you know, Estelle got into the banking discussion too about what to do and also what to help with young people.

people. Yeah, absolutely right, Mike. It's timely, especially right now because we're sort of coming into that summer job season when young people come home from university and looking for work. But, you know, you contrast that with the state of the economy right now, and it's a soft economy. And, you know, with some of those challenges, it is a challenging environment for younger generation. And as you said, catching the attention of Canada's bankers and particularly CEO of CIBC, Victor Dodig this week, who was speaking in Toronto earlier,

You know, raising some ideas on how you can support a younger generation, but also pointing out the challenges that they are facing and not necessarily a quick fix for what's a not so encouraging economic backdrop. Well, you talk about summer job market. It's the worst since I think they came out with May 2009.

You know, there's a great example of that, you know, and so we say go to university and work or wherever, you know, and that's the worst job market. I mean, that's just another statistic that comes there. So what did he have to say, by the way? Because I know they were taught, he talked about a couple of things that, you know, the government could have a shift in policy that aren't going to solve this, but could help. You know, one idea, you know, it almost sounds like a bit of a back of the envelope type of idea, but not taxing income up to $75,000 for Canadians under 30

If they have up to 15,000 or above 15,000 in a registered savings account. And the whole notion of it is why are you taking away their income when there's a generation of Canadians now that can't afford to get into the housing market? So we've had all these sort of fancy policies about how we maybe help them increase savings and grow savings tax-free.

But, you know, the notion, and I think it's an interesting one, why are you taking away their income? Why are you taxing them above $30,000? So, you know, it's changing the conversation, the narrative a little bit.

bit. Well, I love to hear that, by the way, because one of my things is, you know, on Money Talks, we've talked about this challenge of homeownership for young people. And I say it's mathematically impossible in major urban centers. But one of the reasons is he is addressing is because half your income goes to some form of tax. So even if you're an average earner, you're still paying about 30 percent income tax.

Well, how are you supposed to save for a down payment? And I think it's mathematically impossible with the rising costs of living, et cetera. And so I'm happy to hear that put out there as something that we need to discuss. This is not getting better. No, no.

No, I mean, you know, even the other economists, Dave Rosenberg, the generation that can't get out of their parents' basement. And, you know, it's very much true. So, you know, it is changing the narrative a little bit, especially, you know, with their banks, our banks and their finger on the pulse. What they see is a very challenged economy and don't even using the term wartime economy because he looks at the structural issues in Canada right now.

and doesn't see this as a snap of the fingers policy fix, even with, you know, everyone excited about a Carney government. He says wartime because this is going to be years in the making to actually come up with fixes that address what have been these structural issues.

Well, you know, we just alluded to it, but come on, there's a 22% unemployment rate for young men in this country. You know, can we just think about that for a sec? Or, you know, there's 20% unemployment for returning students when they're looking for a job. You know, these are monster numbers that I don't think get near enough play. So I'm glad at the very least he introduces the conversation, you know, within that. It's, yeah, it's a head shaking time for me. I just think we have an obligation to the younger generation that we have failed to

And then we reinforced it, in my opinion, my opinion only, in the, you know, the poll numbers told me that there was this group, you know, who was more likely to vote for more of the same were seniors. But they aren't the ones impacted by policy. They're already in a house to a large extent. Not everyone, of course. You know, it's, yeah.

I'm going to keep going on about that. That's a warning. That's a money talks warning. No, it's fair. But those segments of the labor market that you address, I mean, they're only further challenged when you look at the general trend in the broader labor market too. And, you know, 7.0 on a jobless rate the first time since 2016. And then you look at the gap

between Canada and the US in terms of unemployment rates, the widest right now, all the way back to 2001. Those are foretelling of a weak economy. So it only further accentuates the stresses on those segments of the labour market as well. Yeah. Just one last thing on that. People get confused. As you said, now we're up to 7% in the unemployment, but the report also will say we added 8,000 jobs and people say, well, how do you go up in unemployment? Well, there's

There's a few ways, but one of them is you just keep adding population, you know, well above the rate of increase in employment. So,

And there's other ways that people can leave the labor market and just say, I'm not looking for a job anymore. But yeah, I think that's an important number you've brought forward, but it is confusing at times because what is it, Rob? You need 30,000 new jobs to break even, and we had 8,000 in the month. Yeah, exactly right. Job growth is not outpacing the growth of the labor force, very simply. So as you said, adding population, you need to produce more jobs in order to keep that number stable, and we haven't seen that.

Well, aren't we the good news twins here, Rob? But I mean, if we don't sound the alarm on this stuff, what's going to happen? And people should know it's alarming what's going on for young people. Rob, thanks very much. You're our representative as a young person when you look compared to me. But yeah, Rob, thank you for taking the time and go to bordergold.com, bordergold.com. You'll find Rob there making a weekly commentary. Thanks, Rob. Thanks, Mike. Time now for the shocking stat of the week.

The reduced purchasing power of our currency is the key component, you know, of the rising costs of living. Old expressions like a dollar just doesn't buy what it used to is a reflection of that phenomena. I mean, that reduced purchasing power of the currency is our main theme on Money Talks to help protect your standard of living.

I mean, it certainly hurts your finances. But the point I want to focus on today is that it doesn't necessarily hurt government's finances, given they're the net borrowers. They borrow in today's dollars and think about it. They pay back in dollars that don't buy near as much thanks to inflation. And that brings me to the shocking stat. Let's say you bought a five-year, $100,000 Government of Canada bond in June 2020.

You may have just been told it was the safest investment out there. That certainly depends on your definition of safe. Yes, the government will pay you back when it matures. But the key is, how much in terms of goods and services can that $100,000 buy when you get paid back? Well, the answer may shock you. The $100,000 you lent the government, let's say five years ago in June 2020, buys less than $83,000 worth of goods and services today.

And that's for the average basket of things. I mean, for some specific items, it's going to buy a lot less. I'll give you an example.

$100,000 back in June 2020 could have bought you about 42 ounces of gold at that time. Well, today that $100,000 buys you 22 ounces of gold. So you lent the government $100,000 and they're thrilled to pay you back in a currency they can't buy near as much. A great deal for them, not a very good deal for you thanks to inflation and that declining purchasing power.

You know, something's been on my mind with the real estate market, not only how important it is and the huge problems we're seeing in certainly urban centers like Vancouver and Toronto with the pre-sale market, as Ozzy Jurek and I have been talking about, as he's been talking about for months on ozbuzz.ca. Ozzy, I want to bring you in and ask you a question out of the blue, so get ready. I'm just wondering, you know, when the real estate market was hot and prices were getting, you know, unaffordable for so many Canadians,

They put on foreign buyers bans. You know, they said, we don't want the foreign investment, the foreign buyer to come in. I'm wondering if that could be reversed if things get bad enough, because we need buyers in the real estate market to support it and support, you know, development, et cetera. So I'm just throwing that out at you.

Well, it's kind of interesting that not only did we bring in first a tax, which still survives in BC, but we found an outright ban of all foreign investment in residential real estate for two years and we extended it another two years to 2027. And the idea would seem to have been that the government thought the foreign buyer was entirely responsible for increasing house prices. Now, that has been proven in study after study to be incorrect. It's not been the foreign investor.

In fact, what does a foreign investor do? He comes and he buys a pre-sale. He has safety for his capital with our banking system and so on. And then if he makes a profit at the end, he likes it. And that's how things get built. Everybody thinks developers sitting on $100 million to build a building. No, they need the pre-sales to get enough.

sold so that they can get financing and currently that's not there at all. So we're relying on the local market and local market right now is confused and retired. And so, you know what, Mike, nobody is building.

Yeah. Well, I mean, and again, all these grandiose talks about economic growth, et cetera, you're not doing it without the real estate market. Is that important a component of our overall growth, especially in the residential size? We just look at the numbers from the last several years. So, yeah, I mean, it's going to be interesting. Doesn't make any sense whatsoever. Not in BC. In addition to that, if you do the farm or buy some commercial real estate or development land, right?

The tax of 20% is put on top of that. It isn't just a residential problem. So the idea that the foreigner is the bad egg is ridiculous. Now, we have now in the United States another attack on foreign investments through Bill 899. It's a Trump venture. And the experts are saying, look, you bring in that bill, all the money is already a lot of money is leaving the U.S. right now.

And so everybody in Canada is saying, oh, it's good. They're leaving the U.S. Maybe they come here. No, they won't because we just have as unfriendly an environment as they have down there for foreign money.

As I say, I mean, this is a story that it's funny, we talk a lot about real estate, but I think the importance of the economy, it's time to highlight that again, in terms of, you know, we're talking with Lance Roberts earlier about, you know, the US strategy for overcoming their deficit and debt challenges through economic growth. They can debate whether that's going to happen or not. I must, you know, must say that Prime Minister Carney seems to acknowledge we need economic growth.

in this while they're building up the deficit, but you're not doing that without real estate.

Well, and it is so illogical, you know, because we want building to be done. Government doesn't have the money. The investor is not the bad person. Imagine you put $100,000 in the stock market, Mike, what are you expecting? Are you expecting to do it for the goodness of your heart? Or do you want a profit or maybe a dividend or something? Well, the foreign investor or any investor, for that matter, in the pre-sale market, that's exactly his goal. Only the outcome is good for the

Economy, good for the country, good for the housing market, good all around when we are saying, no, we don't want you. Okay, Ozzy, I've got to finish with throwing something out at you. I mean, this is completely out of left field, but it's an interesting subject because I was talking with Lance earlier about the huge growth of artificial intelligence and the proper opportunities, etc. And I know you've been talking a little bit about this. It's about self-storage and how that may apply.

You know, Mike, at the World Outlook conferences from 2005, almost for 10 years, every time I said, put your money in self-storage because we're getting older as a society, we need it. And the big thing is they're inexpensive, they're real estate play and a cash flow play and put in a light bulb, you have a deluxe unit. But the problem was always, Mike, that it was very highly intensive. You had to open the doors, you had to check out there and so on. Well, now with AI, we

We did a video with Ruben Ugarte and his wife who run three major parks, like 300, 400 units, away from Vancouver in Alberta and in the United States.

all on their machine. And the AI now checks out the purchaser or the user of the thing, opens the gate for them. They don't pay. Within three days, everything is locked. You know what I mean? It's automatic and you don't have to be there. Now, they have an inspector that goes around once in a while, but not this constant 24-hour-a-day that we had before. But managing with AI...

In this area, this technology integration is just mind-boggling and good for the pocket. Yeah, well, I mean, and there you go. I mean, it becomes more...

I was going to say affordable. It already is, but I mean, it's more profitable. You know, this less hassle, et cetera. And it's just so funny, as I say, as Lance was talking about that earlier, about some of the transition. And I know you've been talking about this for years. And I thought, man, this thing's got to have an application for self-storage. So that's another thing. And that's why people should check out ozbuzz.ca. It's absolutely free. You just put in your

put in your email address so they know where to send it. And let me ask you this, Ozzy, have you done one on YouTube yet on that sort of subject? Actually, we did. It's called Wow, Discover Self-Storage, Your Next Big Payday. Well, there you go. So you can check that out. Just put Ozzy's name in on YouTube, Ozzy Jurek, and you'll get it. But again, fascinating subject. Thanks, Oz, appreciate it.

Thanks, Mike, for having me on. Oh, and finally, I want you to remember something. Any politician that promises not to raise your taxes is like a vampire promising to become a vegetarian. There you go. Have a great week.

I want to go live to the trading desk now and bring in Victor Adair. Vic, I got to tell you something here. You know, I'm watching, I mean, horrible situation. I shouldn't be doing anything. It's sad what's going on in Los Angeles, you know, but you've got, you know, national guard troops in the streets, you know, uh,

And I'm looking and I go, and the market doesn't seem to care very much. And it's had me starting to think, Vic, that I'm not sure what the market cares about at this point. They seem to overcome. I mean, I got tons of bad news if they want it. I'm the original climb the wall of worry because there are a lot of worries out there, as I was talking to Lance earlier about.

Well, you know, Mike, actually in my trading desk notes last week, one of my closing paragraphs was titled, what are we trading? You know, I remember back years ago when I asked that about copper, I said, you know, when we're trading copper, are we trading pallets of red metal or are we trading some sort of over-hypothecated Chinese financial instrument? I don't know. And when I look at the markets these days,

I asked that question even more so, you know, when we're looking at whether it's the currencies markets or the stock market or whatever, but certainly the stock market, I say, what are we trading? You know, you look at how the say levered ETFs go up and down like crazy. And, and in particular, let's say a stock like Tesla, when,

what I call the gambling nation takes a position in Tesla, what are they basing that on? Are they just feeling lucky? They certainly didn't do a deep dive in EBITDA. So I'm thinking that the motivation is usually sentiment. And to come back then to what you're talking about, the American military on the streets in Los Angeles, you would think that

That there be some powerful sentiment either for or against what Trump is doing, but by putting the military in the streets. And yet the market is like a snooze fest, it seems so far. So I don't know why that is happening, but that's what's going on with the financial markets right now.

Yeah, and I mean, there's so many stories to be following in there. I like Lance's point about narratives, you know, seem to take hold. And, you know, Ozzy and I always talk about what's happened to the real estate market is really psychology change. Sure. You know, I mean, we still need, it's a cliche, we still need our houses, of course, but there still is demand for houses, except for the psychology change, so people back off. And that's why the markets are so fascinating, because it provides such a ready measure

for that at this point. So you're reminding me, Mike, years ago, I used to say to folks, you know, if, if you want to become a trader,

you're probably better preparing yourself if you study psychology than if you study mathematics. Yeah. Well, our old friend, Jim Dines, God rest his soul and God bless him with mass psychology. One of the pioneers of that approach. And by the way, each one of us can become our own sort of lab for that. You know, like I'm, I'm a laboratory experiment when it comes to over the years, observing my own psychology, uh,

interplay with the markets and my decision-making, you know, and of course, you know, why you have this whole list of approaches after, you know, a 40 year career of trading, you know, that's why we have rules is to protect ourselves against that sort of emotional response. But I mean, it's still alive and well, obviously. I'm happy to say I've got a autographed copy of mass psychology from Jimmy Dines, but Mike, you know, let's, let's maybe get into this a little bit.

Usually you and I talk about what's happening this week, but we've started off here taking a little bit of a big picture view. I think one of the real big pictures is that for the last 15 years or so, the American stock market so outperformed the rest of the world. It's like the rest of the world disbanded.

didn't matter. At the end of December, the market capitalization of the American stock market was 70% of the whole world's stock market capitalization. So we had expressions like, you know, American exceptionalism, and we call the exorbitant privilege when your currency, the US dollar, is the reserve currency of the world virtually, and on and on. And then as Trump became the

he was talking about this new golden era that was going to happen. And it was in a way, it was like that was the cherry on top of a 15 year bull market and,

the U.S. dollar coming into the beginning of this year, the trade-weighted U.S. dollar at least, was at all-time highs. The regular U.S. dollar index that we talk about was at effectively 23-year highs. So it was like, could things get any better? Well, we've had some broad reaction. And there's been analysts talk about the sell America phenomena that's going on out there. And

It's interesting to see that after the liberation day drop in the market, stock markets in the United States and the rest of the world have come roaring back, but the United States dollar hasn't. It stayed down. And even while Mike, American interest rates are higher than they are in a lot of other countries in the world, certainly Canada. And I,

I wonder if this sell America thing phenomena, and it's not like a tidal wave. Believe me, it's not like that. But it's kind of like at the fringes that's happening. And I think a lot of it really is tied to the rest of the world being unsure, uncertain, uneasy, whatever, with the way Donald Trump seems to be taking America in a new direction and America's relationships.

With the rest of the world. So, you know, capital goes where it's treated well, where it's comfortable, whatever. And then there's also that thing, as you and I've talked about, you know, after you've made $7 trillion, you might decide to take some profits and bring your money home.

Well, and also you've got the president sitting there in February saying, I want a lower dollar. And he's certainly acting on many of his other, you know, other promises there. So, yeah, it's within that. A fascinating time though, Vic. Great job summarizing that. And I invite people to go to victoradare.com.

I always challenge that CA or comp VictorDare.ca. I do it all the time. It's automatic on my computer though. So I don't have to type it in every time. It's VictorDare.ca, but I love looking at the charts and some of the things you're looking at within that, because I think it becomes a, you know, the visual is very important too. Vic, thanks for taking the time. Have a great week. Thanks Mike.

Time now for this week's Goofy Award. Under supply management, milk prices are not subject to the market prices and instead are set by the Canadian Dairy Commission, which oversees the supply management system for dairy. Between 2020 and today, they've increased prices for raw milk on six separate occasions for a total of about 22%.

Supply management is the very definition of special interest group politics. I mean, it benefits about 9,000 Canadian dairy farms with the majority in Quebec and Ontario, but it forces 42 million Canadians to pay above market rates for milk and other things.

In the meantime, though, that increased costs under supply management have pushed between an estimated 133,000 to 189,000 Canadians into poverty. They added about $438, maybe as much as $517, depending on how much you purchase, to the average household's grocery bill.

And perhaps more shocking is that under supply management, you've got to remember dairy farmers are not allowed to sell any milk they produce over the government's mandated quota. Well, that results in over what? 6.8 billion to as much as 10 billion litres of milk were thrown out between 2012 and 2021. That's worth about $7 billion, enough to supply 4.2 million people. I mean, they're throwing it out.

As Sylvain Charlebois, director of the Dalhousie Food Analytics Lab, points out, if you're wasting 7% of the milk you produce, well, logically, you can only come to the conclusion that milk is too expensive in Canada. And that brings me to this week's Goofy Award. Don't hold your breath for any political leader to protect consumers, especially the poor, because they fear a political backlash primarily from Quebec and Ontario farmers. This

This week, all political parties passed by unanimous vote a Bloc Quebecois bill protecting dairy quotas in all future trade talks. So if President Trump comes and says, hey, we're not going to make a trade deal with you unless you remove the dairy tariffs for American farmers. Well, all the political parties are prepared to say is to heck with you and to heck with the Canadian public's good.

We've got a dairy lobby to please after all. And that lobby, the Dairy Farmers of Canada, are by far the biggest lobby group in the country. They spend four times more than the second biggest lobby group to convince MPs to put their interests ahead of the Canadian public. As the vote shows, mission accomplished. And one more thing.

Given we're in an environment where government, politicians are chirping about the importance of economic growth, consider the words of University of Calgary economist Trevor Toome, who states, no political statement about commitment to economic growth means absolutely anything. It's from a politician who supports supply management. That's all the time we have this week. Glad you were with us, by the way. But in the meantime, go to Mike's Money Talks.ca and sign up

for five minutes with Mike. Why? Because it's absolutely free. We get to all sorts of things. I'm still, and I know I say this all the time, amazed by how much information, how many facts don't get through in the mainstream media and the newscast, et cetera, that are so pertinent to our lives. So you can fix that by going to Money Talks Tweets, Michael Campbell's Money Talks, or sign up for five minutes with Mike. In the meantime, I hope you have a terrific week.

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