Monday, December 21, 2015

Money Show 2015 - John Stephenson

John Stephenson was the next speaker I listen to at the Money Show for 2015. His talk was called "It's Been Interesting."

Today's markets are hard because they keep changing. There was an 18% move in oil at the end of August. There are large moves over short periods. There is an uncertain outlook globally. It is going to be challenging for Canadians. Global Growth is going to be low.

People are very uncertain about China. China says they are growing at 7%. Some people think the figure is much lower. Some people think that the growth in China is negative. He believes that a negative growth is going too low.

Canadians should be investing in the US market as it is a better market currently for Canadians. The markets globally have sold off over growth concerns.

The next thing is the Federal Reserve Interest Rate going up. Russia's market is a dead cat bounce. Japan is printing money. Europe is an interesting place to invest.

The problem with the world is people. There was strong growth in labor in the 1980's and 1990's with women going into the workforce. Japan would be better off if it allows women into the workforce. There are declining women in their workforce. The male participation rate is declining. The problem is that if you pay people to doing nothing, they will do so.

The working age population is declining. We are getting older and productivity is down. He does not see tech helping with productivity in the future. We are going to have slower growth in the future.

Below replacement level fertility rates is the norm globally. The fertility rate is 1.7 in the G7 and 1.9 in developing countries.

Canada is second to Australia in immigration. Immigrants are top engineers and scientist. They speak English because lots of countries have education in English. Google and Facebook are opening offices in Canada because they cannot get the people they need into the US.

The millennials were born from 1980 to 2000 and are 15 to 30. They are the bright spot, but these people feel entitled. They are the second largest cohort in the US at 80M. Millennials are now the biggest generation in the Canadian workforce. They are the Seinfeld Nation and are having a big impact on the US economy. They have no mortgage, no car, no spouse and no children. They spend more money in restaurants than in grocery stores.

The Chinese GDP is skewered towards investments. 20% of the investment is in roads and bridges. 47% is in infrastructure. But they have ghost cities and bridges to nowhere and all this is being financed by debt.

The commodity forecast is that it is not much of a super cycle. US rigs are in decline and also crude is in decline. Tech has allowed the US to pull oil out of the ground that they have known about for a long time. The US is still a huge consumer of oil at 22% of world's oil production, so they will still import oil.

Saudi Arabia was built on oil. The falling price of oil slams on the breaks for US shale production. The world is slowly coming into some balance in oil. Also, Iran's oil is coming online. For energy stocks, the worst is probably over. Oil reserves are declining worldwide, so we still need Canadian oil sands.

Score Cards: The best opportunities will have slow growth. Consumer discretionary will have good growth going forward. Electricity utilities are now ok but not so in the future. Old and new tech is fine, like IBM Facebook and Netflix. The millennials are on the phone all the time. Health care is an area of interest. US banks are cheap and Canadian banks are attractive. China is slowing, but the question is how much. Material stocks should be avoided, but oil is ok.

We have a very slow recovery. We are not likely to have a recession or a bear market anytime soon. Markets are not cheap, but they are not outrageously expensive either. Real estate is expensive.

Consumer discretionary will be the first place to get hit. Enbridge with a 4% yield is risky. Bonds are 2% without risk. These are government bonds with no risk. Normally government bonds have 6% rates. If bond interest goes up, people will prefer bonds of no risk and Enbridge's stock price will fall.

Canada is a follower. The US will raise rates and we will follow. The US can go alone and raise rates. They will not raise them to normal levels anytime soon. It may take decades to get back to normal interest rates.

The Liberals are better for the stock market as is the Democrats. He is bullish on US and Mexico. He thinks European stocks are good, both industrial and financial.

On my other blog I am today writing about The Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF) ... learn more...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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