Tuesday, April 13, 2010

Godfried’s 10th forecast of the year - The major investment themes of this Decade are becoming increasingly clear

  1. Oil prices will continue their uptrend after the interruption of the 2008-2009 Great Recession
  2. Gas will be the truly best investment opportunity of this decade
  3. Demographics will strongly influence the labour market:
    • a. Babyboomers will work longer for social and economic reasons creating a highly competitive market for experienced workers.
    • b. Echoboomers and younger generations will benefit from Babyboomer attrition and the corporate needs to have a continuous experience range in their labour force.
      • Educated workers will be in high demand.
      • Surprisingly workers with a craft will be in high demand as well
      • Blue collar labour and new immigrants will find better employment opportunities in N. America when high transportation expenses and the increasing affluence of emerging market workers will make manufacturing close to population centres more competitiva
  4. Inflation is a conundrum. Babyboomers will have higher savings reducing credit demand. With less people in younger generations the demand for ever more education moneys will abate. Immigrants with basic education are cheaper than promoting higher birth numbers. Although healthcare costs will escalate, the Babyboomers are the wealthiest generation in history – a two-tiered healthcare system where upper middleclass and wealthy retirees pay for their own healthcare while the less affluents will be the only population group for which provincial health care provides is nearly unavoidable.
  5. Higher energy prices in the past were considered the result of inflation and an over-heated economy. This caused central bankers to raise interest rates, which in turn caused increased government deficits. This time, we have hopefully learned. If interest rates are tied to core inflation rather than energy and commodity prices, in spite of massive government debt, interest rates hopefully do not reach the excessive heights of the 1980s.
  6. Return of Manufacturing to the major population centres of Eastern Canada
  7. Increasing wealth and population in Western Canada will be centered around Calgary and Edmonton. With the bulk of oil&gas company headquarters established in Calgary and the centre of industrial services in Edmonton, these are the two economic power houses of the West. Vancouver will wilt because of the absence of oil&gas company head quarters and because of its high lifestyle costs and expectations. Vancouver is no longer competitive.
  8. China and India will cater increasingly towards their more affluent and growing middle class. Their economic growth will moderate to the 6 to 8% range, in particular due to decreasing exports. North America will benefit from abundant and relative cheap gas prices (when compared to oil). The tendency of oil companies to pay for ever higher land sale prices and extraction methods will make oil less profitable than gas in spite of ever increasing oil prices.
  9. Saskatchewan will likely recover from the set-back of the fertilizer price crash. It will benefit from uranium, potash and to a lesser degree from increased oil prices. Its economy will become increasingly dependent on commodities, while the absence of major population centres and corporate head quarters will prevent economic diversification and limit population growth.
  10. Ontario’s manufacturing will recover but it will be economically outdone by Alberta which will become the economic powerhouse of Canada with Calgary taking over as the most hated city of Canada and The magnet for immigration.

Dissenting opinions please.

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