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Steve Jobs (1955-2011), Something To Watch!Inflation, Recession, Depression?, Household Dependence on Government, 4 Minute 'Listen'

October 6, 2021

Steve Jobs (1955-2011), Something To Watch!Inflation, Recession, Depression?, Household Dependence on Government, 4 Minute 'Listen'
Today's Economic & Resource Stocks Commentary
by Ian R. Campbell, FCA, FCBV

Commentary and discussion on the day's filtered news. Subscribers should consider reading our daily commentary in conjunction with the Daily Filtered News posted each day to Stock Research Portal's homepage.

Steve Jobs (1955 - 2011)

As I am sure you all know, Steve Jobs died yesterday at age 56.  Here is a Steve Jobs quote that I consider worth not only carefully thinking about, but thinking about every day: 

"Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma - which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary."

Something to Watch 

An article yesterday titled 'No regulatory approval needed for PetroChina-Athabasca deal' - reading time 2 minutes - reports that if PetroChina purchases the 40% interest in the Mackay/Dover Athabasca Oil Sands Corp. ('Athabaska') project it does not already own, no Investment Canada Act review will be triggered. This is because a review is not triggered under that Act if a non-Canadian already controls a Canadian business. In this case PetroChina currently owns 60% of Athabasca.

That leads to me:

  • wanting to follow this story as it unfolds, which I will do in these e-mails. I will be surprised if PetroChina doesn't acquire the balance of Athabasca it does not own, thereby wedging Chinese interests more firmly into Canada's Oil Sands opportunity. Is say this because I believe that irrespective of what environmentalists and others say and do to try to stop Oil Sands development, practicality and commercial reality will dictate that the Oil Sands will be further developed as time passes;
  • wonder whether an Investment Canada Act review results where a non-Canadian purchases control of a non-Canadian company that owns a controlling interest in, or all of, a Canadian company. If such a transaction is not subject to Investment Canada Act review this could represent a back-door way for a foreign government or foreign company to gain control, and ultimate complete ownership of Canadian domiciled assets. I will follow up on this with one of my knowledgeable lawyer friends, and let you know the answer in a subsequent e-mail.

I believe the Canadian Oil Sands, housing about one-third of the world's current known oil reserves, collectively is a world 'strategic asset'. I have thought that since the early 1970's, and continue to believe that. I expect China to be demonstrate more and more interest in Canada generally, and the Oil Sands in particular, and think that interest has a very strong likelihood of leading to conflict between the United States and China as time passes.

Some things to think about.

Inflation, Recession, Depression?

An article yesterday is titled 'Permafunk, Japanization, Long Depression: Which is it' - reading time 4 minutes. The article mostly centers on views expressed on Monday by Harvard Professor/Economic Historian Niall Ferguson that:

  • the fiscal and monetary developed country government stimuli (read the U.S. in particular) after 2007 has had modest impact, but that said stimuli may have averted a second 'Great Depression' but not a depression per se;
  • today is not the 1930's because (1) China has emerged as the world's second largest economy, (2) globalization has not broken down into protectionism, and (3) during the recent 'developed country' economic downturn "the era's rapid technological revolution has not skipped a beat"; and,
  • what the world most likely faces is a "slight depression", and not a 'Great Depression'.

The article says that anecdotal rules of thumb suggest 'depression' to be a circumstance where a peak to trough drop in a country's (or I assume the 'world's, in a world context) real GDP (being inflation excluded GDP) is more than 10%, or where a recession lasts more than 3 years. By way of a reference point, the article says that in the 18 month U.S. (I continue to say technical) recession of 2008/2009 U.S. real GDP dropped 5%.

I have read a good deal of what Niall Fergusson has said over the past few years, and have watched him both speak and debate. I have not had an opportunity to meet or talk with him. My sense of him is that he didn't get to be a Harvard professor by being stupid, and he certainly is articulate. Like everyone else I 'follow', I listen to his observations and opinions and weigh them in my own thinking. In Fergusson's case I listen and think harder than I do in the case of some others. That said, my comments on the foregoing are as follows:

  • whether in the developed countries going forward we face hyperinflation, inflation, recession, stagflation, or depression - and I am sure you will agree that there are as many varied opinions on that as there are commentators - I am less interested in Fergusson's statement that 'globalization has not broken down into protectionism' (which I think is broadly correct to date) than I am in knowing his views on whether protectionism is about to erupt in spades in the United States in particular. I dealt with this in my e-mail on Tuesday under the headings 'Global Trade War' - reading time 1 minute, and 'More On Trade - Gloves Coming Off' - reading time 3 minutes;
  • I am not sure what Fergusson infers from "rapid technological revolution not skipping a beat". To me continued rapid technological revolution leads to ever more capital intensive manufacturing processes which employ less people. A continuing mantra of mine is that 'service businesses typically to not add durable value goods to an economy' in the way durable goods manufacturing businesses do. Combine that view of mine with the recently published statistic that in the month of October the 7th billion human world resident will be born when the world population was but 1.6 billion one hundred years ago. Then work to convince me that world events in the largely agrarian world of 1870 (when the world population was about 1.4 billion), which the referenced article refers to a period of 'long recession', and the 1930's 'Great Depression' period (when the world population was about 2 billion, radio had just been invented, and television didn't exist) can be used as benchmarks to intelligently discuss today's world in economic terms - trust me, that would be a 'hard sell' for me to be convinced; and,
  • at the end of the day like everyone else I am forced to 'make bets' based on my own 'consensus thinking'. My current view is that what most of the developed countries will face going forward is a form of Stagflation, where developed countries are going to face a form of stagflation where the prices of non-durable goods (food, energy, and basic consumables) inflate, but the price of durable goods (long-term assets such as houses, cars, refrigerators, etc.) deflate. Contextually, 'stagflation' describes an economic environment where the inflation rate is high, and the economic growth rate is low' or, alternately, 'a period when an economy is stagnant while inflation is rising'. Hence I say that what I think we will face in developed countries is a 'form of' Stagflation, as contrasted with simply adopting the word 'Stagflation'.

I have discussed Stagflation previously in these commentaries - for example see 'Inflation - Stagflation?' (April 25, 2022) - reading time 4 minutes, and 'Inflation or Stagflation?' (April 13, 2022) - reading time 1 minute. I have read and reviewed a lot of 'stuff' since April 25, and so far nothing has altered my view as to where we in the developed countries are headed. You might want to visit my prior commentaries and think about whether you agree or disagree with me.

I think all of the foregoing is worth your time to think hard about, and then reach your own conclusions. I urge you to increasingly think about what people say, and then determine if what they say makes sense to you - as contrasted with thinking about what others say about the people that say things.

 

Household Dependence on Government!

 Here is something I suggest is worth seriously reflecting on. A Wall Street Journal Blog article yesterday says the '

Nearly Half of U.S. Lives in Household Receiving Government Benefit' - reading time 3 minutes. The article reports that in the first quarter of 2010 48.5% of the U.S. population lived in a household that received some form of government benefit, up from 44.4% in the first quarter of 2008. I suspect that percentage likely is higher again in Q3 2011, which just ended 6 days ago. I suggest you read the article, and think hard about the consequences to Main Street America and the American economy if and when the U.S. governments at each of the Federal, State and Municipal levels are unable to continue to fund some or all of the programs they currently do at the levels they now are funded. It seems to me that at some point, perhaps not very far in the future, practicality dictates it has to come to that.

There are many seriously bad societal and economic outcomes from this if and when it occurs (and I say 'if' because I suppose virtually anything is theoretically possible). It seems to me that one outcome might be that 'good and experienced people' may shy away from having much of anything to do with a possible political position, irrespective of government level. Query: can that be happening today as the U.S. Republican Party seems currently to be looking harder than I think it ought to have to for what it hopes to put forth a year from now as a Presidential Candidate it thinks can win the 2012 election - witness possible 'legitimate candidate' (or so I think) New Jersey Governor Chris Christie's 'request for a dance turndown' two days ago. Surprising to me, even Sarah Palin announced yesterday she will not be running for President, citing 'my family comes first' as the reason.

Who will be the U.S. President who will be left 'holding that bag' in the history books?

I suggest you read the article on U.S. household dependence, and if you imbibe, consider having a second drink this evening.

Ian R. Campbell

About Ian R. Campbell
Ian R. Campbell, FCA, FCBV, is a recognized Canadian business valuation authority who shares his perspective about the economy, mining and the oil & gas industry on each trading day. Ian is also the founder of Stock Research Portal, which provides stock market data, analysis and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. Ian can be contacted at icampbell@srddi.com

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