To The Pointwith Boris Bozic
Commentary, Opinions, Thoughts and Discussion on Current Events, Politics and The Mortgage Industry

0 Comments Happy Father’s Day!

Article written by on the 17 Jun 2016 in Canada,Current Events,Euro 2016,Family,Personal,Travel

My word, it’s been a long time since I posted a blog.  The reason is fairly simple –  unmotivated, writers block and nothing truly compelled me to write one.  I’ve come to realize that writing a regular blog is like going to the gym.  Once you stop, it’s hard to get back into it.  But like going to gym, something happens that makes you go back.  Example, you see a picture of yourself, and you rationalize that the camera adds pounds, but my God; did five cameras take this picture of me?  Back to the gym you go.  As for this blog, it was walking past a display of Father’s Day cards.

This blog is about my father.  I could use many adjectives to describe my father, but a simple phrase captures his true essence;  he’s a good man.  My father is like many dads.  Worked hard all his life, and always put family first.  Both of my parents immigrated to Canada in 1958 and they met here.  They started a family and never asked for a handout.  They provided for two sons, and gave them every opportunity to succeed.  Our household growing up was not unlike other Canadian/European homes.  Mom was the daily disciplinarian; Dad was the executioner.  If he had to get involved, I was in deep poo-poo. 

I still giggle thinking about the neighbourhood I grew up in as a child, predominately Italian, and how every household seemed to have the same playbook to get their sons to finally come home for dinner.  It didn’t matter if the Mom was of Croatian, Italian, Hungarian or of German background; it was the same routine.  The moms would come to front door, and call their sons in for dinner.  This happened every five minutes, for about forty-five minutes.  Exasperated, the moms on the street went to the heavy artillery, the father.  Every father on our street had a unique whistle.  As kids, we could identify each whistle by tone and number of bursts.  When it wasn’t your whistle?  You continued to play ball hockey.  When it was your whistle?  It didn’t matter if you were on a breakaway with a wide open hockey net in front of you; you dropped your stick and ran home.  That’s just the way it was.

I still remember my teenage years and thinking, how did these two, my parents, ever survive without my council and knowhow?  It was only when I moved out of the house at nineteen that I realized that maybe they’re not so dumb after all.  After six months on my own? I believed my parents were the smartest people on the face of the earth.  It was only then that I stated to think about the sacrifices and risks my parents took.  Meaning, I started to look at them through a different lens, one of respect and admiration.  I’m still taken aback at how proud my Dad is to be a Canadian.  It’s deep rooted and it’s based from being so thankful.  My father escaped from a communist country, one which was oppressive and treated him like a second class citizen.  He’s never taken for granted that Canada gave him the opportunity to live a free and fulfilling life.  It’s why when I ask him if he would ever contemplate moving back to his homeland, his answer is always the same, never!  For him Canada is his home, and this is where his life is.  It’s one of the reasons why when I hear the Canadian national anthem I get a lump in my throat. 

One of things I am most thankful for is that my dad taught me about my ancestry, and where our family was originally from.  I was born in Canada, but I share DNA with family in Croatia.  My parents taught me the language and I’m grateful that I can converse in two languages.  My dad taught me that when asked what nationality I was, the answer is Canadian, with Croatian heritage.  But Canada always comes first.  But one thing that Canada has never excelled at is the game of soccer, at least not on a global scale.  My dad introduced me to the game of soccer at an early age.  I was taken by it right away.  The tension, the crowd chanting and singing, and over time I realized the game of soccer was more than just a game.  As an adult I decided to thank my father for introducing me to the game of soccer, so we embarked on a soccer journey together.

It started some eight years ago, Euro 2008, in Austria.  For those who may not be aware, the European Football Association holds a championship tournament for European soccer teams every four years.  It’s soccer at the highest level, and I always believed it was a better brand of soccer than the World Cup.  No patsies or soccer fodder can qualify for this tournament.  The number of teams that qualify for the Euro is limited; therefore, every team can win on any given day.  So as a family we went to Austria to watch three games, all involving the Croatian National Soccer team.  The second game we witnessed is still burned in my memory, Croatia versus the mighty Germans.  Germany is to soccer what Canada is to hockey.  The depth of Germany’s talent pool is so deep that they could probably field two teams for the tournament, and play themselves in the finals.  So this game was truly David versus Goliath.  Croatia is a country of 4.5 million people; they produce an astonishing number of world class players for such a small country.  But still, it’s Germany we’re talking about.  Our seats were in the end zone, among the Croatian supporters.  Croatian supporters were badly outnumbered by German supporters, but they were loud in voice.  I remember looking past my brother to get a glimpse of my Dad as the Croatian National Anthem was being played.  I was thinking this must be an extraordinary moment for him.  His place of birth became an independent country in 1992, after a brutal war, and today he gets to witness the raising of his homelands flag, and the freedom to sing the anthem without the fear of his former oppressors watching.  More importantly, that they couldn’t do anything about it.  Back to the game, at best we were hoping for a tie, and silently praying that we wouldn’t be embarrassed.  Then in the 24th minute Croatia scored first.  To say the Croatian supporters went nuts would be an understatement.  Shame there was so much time left on the clock because we all knew the Germans would keep coming.  So now we’re into the second half of the game, and then the unthinkable happened, Croatia scored in the 62nd minute.  Now we’re going insane, including my Dad.  We’re up 2-0, against the Germans!  Then in the 79th minute the Germans scored, and I instantly knew that the last 11 minutes of the game would be excruciatingly long.  Our seats in the second half were located behind the Croatian net, so we witnessed wave after wave of German attacks.  They were relentless, and we got the sense that only time could stop them now.  The match clock finally reached 90 minutes, but two minutes were added for “injury” time, or if you wish Academy Award performances for the time wasted by players acting as if they were hit by sniper fire.  I swear I stopped watching the game after the first minute of “injury” time.  My eyes were glued to the referee, silently and not so silently, imploring him to blow the final whistle.  And then it happened, game over, Croatia 2 Germany 1.  It was sheer bedlam after that.  Total strangers embracing, high fiving each other, you just wanted to celebrate.  I looked over at my Dad while a total stranger was hugging me.  I could see him squeezing past my brother to come to me.  I told the stranger that we would have to continue our love affair later, and excused myself.   My Dad approached me, cupped my cheeks with both his hands, looked me in the eye and said, “thank you so much; this is the best gift anyone has ever given me”.  He kissed me on the cheek, and hugged me as hard as he could.

It was at that moment that I decided I would do whatever I could to give him this moment again.  If it meant having to take a part time job scrubbing toilets so I could afford to do this again, then so be it.  I am blessed and fortunate that I did not have to purchase rubber gloves or a toilet scrubbing brush so that I could share these moments with my Dad again.  In 2012 we went to Poland for Euro 2012.  As you read this, we are in France for Euro 2016.  My Dad, my brother and a family friend, who went with us in 2012, decided that the evil, which is far too prevalent in the world today, would not stop us from living our lives.  When we started this journey back in 2008, I thought I was doing this for my father.  I have come to realize that I have been doing this for myself.  If I was to lose every material possession I have tomorrow, the one thing that could never be taken away from me is my memories.

To all Dads, especially mine, Happy Father’s Day.

Until next time.


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0 Comments Trudeau’s State Dinner at the White House – One Expensive Photo Op

Article written by on the 14 Mar 2016 in Canada,Current Events,Politics,US Politics

“I’m great!  Okay, enough but me. So what do you think of me?” In my mind that’s how the conversation went between President Obama and Prime Minister Trudeau at last week’s State Dinner at the White House. I’m sure trade issues, environmental concerns, and Canada’s military support in the Middle East all came up in conversation; but I can’t help but think that at some point the two leaders exchanged winks and knowing head nods. The body language spoke volumes, like, this is really cool. Sure, we might have economic issues to deal with, a refugee crisis, security concerns, an obscene amount of national debt, but that should never get in the way of having a good party; and what a party they had.

In fairness, a state dinner at the White House is not a common occurrence for Canadian PM’s. If I’m not mistaken the last time the head of state from Canada was the guest of honour at the White House was in 1997. President Clinton warmly welcomed Prime Minster Chretien for an evening of Pomp and Circumstance. Let’s see, Clinton and Obama, Democrats; Trudeau and Chretien, Liberals. I find it deliciously ironic that the intelligentsia always campaigns on helping the impoverished, working for the middle class, saving mother earth, but would never dare using photos of a state dinners when campaigning to the masses. That would be too difficult to square. The all-knowing and chosen ones are best fit to suspend reality. There’s no point trying to square the lavishness because it is too complex for simpletons to understand.  It’s something that’s always done, and that should be enough. Oh wait, Prime Minister Harper never had a state dinner in his honour. I’m sure it was simple oversight and had nothing to do with political ideology. (more…)

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0 Comments Squaring The Headlines

Article written by on the 19 Feb 2016 in Canada,Current Events,Economy

So far the New Year has a theme to it. Headlines suggest that we’re at a precipice, and good lord, don’t look down.  And yet millions of people every day leave their homes to experience the joys of riding on overcrowded buses and subways and other forms of less than adequate public transportation.  The roads are jammed during rush hour, which now seems to be extended into Saturday and Sunday.  I’m assuming all these people taking public transit in the morning, and those navigating city streets in the hopes of getting somewhere, all left their house for a reason. Like maybe, a job?

God bless the millions, and millions of people who say to themselves, every day, “the four horsemen of the apocalypse may be on the way, but I have bigger things to worry about”.  GDP growth forecasts being lowered, what do you think about that? Interesting, but I got to get Precious to daycare on time.  Price of oil crashes?  My fuel consumption costs just went down because I have to take the kids to hockey, indoor soccer, jazz lessons, piano lessons, Chucky Cheese, to see grandma and grandpa, acting lessons (strictly for my child because he/she is special) and all this by Wednesday of every week.  Stock market takes a beating in 2016? Yeah, that’s bad but I don’t have time to think about it because (more…)

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2 Comments Trudeau and Alberta, The Sequel

Article written by on the 05 Feb 2016 in Canada,Current Events,Politics

I can only imagine what our newly elected prime minister’s schedule looks like. Given the scope of his responsibility it must be challenge to prioritize his time. Managing to attend summits in Turkey, Paris and Davos, Switzerland, while still tending to the nation’s business, must be taxing. The PM also has to balance the competing needs of the constituents in his riding, as well as every other Canadian in this country. Then, there’s the attention he has to pay to the party base, as well as to those who contributed financially to his campaign.  And then of course there’s the need to find time for legacy issues; the ones that get you into history books, and sometimes burned in the public’s psyche. The thing about legacies is that they are not necessarily created by design. Sometimes it doesn’t work out. For example, our prime minister’s father, Pierre Elliot Trudeau, Canada’s 15th Prime Minister.  

Many Albertans still seethe at the mere mention of Pierre Elliot Trudeau. They think back to the early 80′s, and Trudeau’s National Energy Program, which laid waste to a good portion of Alberta. When you combine the words Alberta and Trudeau, you expect some form of combustion. It’s for that reason I was intrigued to see how our newly crowned Prime Minister, Justin Trudeau, would do when visiting the beleaguered province. I suspect it must be a tough pill for Alberta to swallow, asking a Trudeau for help. But ask they should, and must.

I’ll say this about Jr.; he comes across as having far more empathy than his father ever did. That being said, his father was a man of depth; an intellectual, with an extraordinary wit and a sense of timing. He was the smartest guy in the room, and if you needed convincing, he relished the opportunity to prove it. What Alberta doesn’t need right now is a visit from an eastern elitist with an all knowing attitude. I think what they need is to hear some honesty, and to let them know their government won’t make things worse.

For all intents and purposes, the prime minister said all the right things when visiting Alberta. Frankly, there’s not much that neither he nor Ottawa can do at this time. It’s not like they can snap their fingers and set a new price for oil. Saying Ottawa is there to support Alberta is nice, but it can’t be just talk. There is something that could be done right now. (more…)

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3 Comments 2016 – Here We Go!

Article written by on the 15 Jan 2016 in Canada,Current Events,Merix Financial,Music,Sports

It’s the start of a new year. 

Sure, many were back to work on the 4th of January, but in our industry things get back to “normal” the second week of January.  So, here we are.  Like most people, I believe that what’s ahead will be better than the journey just travelled.  However, to be totally candid, 2015 was a very good year for me.  On all fronts, be it personal or professional.  Having a better year will be a challenge, but that’s life.  You push, you strive, and you never settle.  Frame of mind is critical, and over the last six months I’ve been working on just that.

Not to get all Tony Robbins on you, “awake the giant within…love yourself…blah, blah, blah”, your state of mind plays an import part of all your outcomes.  We all have to fight against a self-fulfilling prophecy.  If you think it sucks, it may not actually suck, but it will eventually suck.  In this day and age it can be challenge to stay positive.  We are constantly bombarded with predictions of doom and gloom.  Take this week for an example, the Canadian dollar dipped below 70 cents U.S., and a very respected economist is predicting it could drop to 59 cents U.S.  And as every info-commercial says, “but wait, there’s more”.  It’s now being suggested that oil could drop to $20 USD a barrel.  All this in the second week of January.  So, how does one pushback against all the white noise?

Here’s what I did.  Firstly, I was finally honest with myself, and I admitted that I was an information and news junkie.  I became obsessed, and needed my daily fix of bad news.  Trust me; it’s not hard to find bad news.  In today’s world it’s everywhere.  It takes a lot more work today to dodge the bad news assault.  Given the reality that we all live in an information world, I came to the conclusion that I had to change my information gathering habits. So no more Fox News, no CNN, and no MSNBC.  I would actually turn to MSNBC, knowing full well that within minutes I would want to throw something at the screen.   Like I said, I was addicted.  Here’s another thing, no more talk radio in the car.  Doesn’t matter if it’s sports or news.  I came to the conclusions that on too many occasions I would arrive at work with a less than pleasant disposition.  Why?  Because I invited mindless babbling into my car, which more often than not would just piss me off.  So things had to change.  There’s no excuse for waltzing through life being willfully ignorant, but given that news is readily available everywhere, I decided that I would control when and where I received my news.  The first real sign that my new approach was working was when someone asked me, “what do you think about David Price signing with the Boston Red Sox, and not the Toronto Blue Jays?”  I was relieved that I didn’t even know it happened. Me, not knowing about something that happened in sports?  That was big!

Here’s what else I did, I replaced information with music.  I know that may sound schmaltzy, but it works.  Truth be told my car played a major role in my musical listening pleasures.  The car has a feature that when you push a button, and say play “artist and song”, it searches the net and finds the song.  It also creates a custom radio station for me.  For example, Rolling Stones Start Me Up radio station.  From there it searches for songs from the same genre.  If I don’t like the song it found, I press next.  The cool thing about this is that it’s taken me out of my 70’s and 80’s musical time machine.  I didn’t know there were so many new artists out there, well, at least new to me.   Bands like O.A.R., James Morrison (not the old guy who sings like he’s got a mouth full of marbles) and Augustana.  Really talented bands and I love the fact that our 14 year old is shocked that I know who they are. 

This may not work for everyone, but I find that I’m in a better mood more often because I’m listening to more music, and not mindless chatter.  I still get my fill of information, but in a much more condensed fashion. More importantly, I decide when I’m ready for the info download.  My new approach doesn’t change the facts, and what’s happening around me.  But it will no longer control me.  Based on what’s happening in the real world, and how the year is starting off, I got my music cranked.  I also customized a new radio station in my car, David Bowie Ashes to Ashes.  Seemed appropriate.

Until next time.



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1 Comments Ontario’s Energy Auditor General Report – We Clearly Don’t Care

Article written by on the 04 Dec 2015 in Canada,Current Events,Politics

We clearly don’t care – and yet we should. Not only should we care but we should be very concerned about the direction and mandate we gave our governments. Ontario’s Auditor General, Bonnie Lysyk, just delivered a scathing report on the Ontario Liberal parties attempt to better the environment, and more to the point, manage electrical power in the province of Ontario; as well as their handling of all government agencies. The Auditor General took the Ontario Liberal government to the verbal woodshed, and gave them a spanking that was rightly deserved. There was no sugar-coating the truth or leaving room for spin.

Most of us are accustomed to hearing about government waste. Regrettably, government waste has become like death and taxes. Fight it all you want, rile against it, but you’ll always finish in second. But when an audit is released, which rivals that of FIFA’s (international governing body of football), all of us should be very worried about finishing second. Here’s an excerpt from today’s National Post:

“By ignoring their own energy planning legislation, the Liberal government has cost consumers billions on their hydro bills. The average electricity bill rose 70% between 2006 and 2014, at least in part because the government ignored its own expert advice, the report notes. That has already cost consumers $37 billion in payments to power generators under what the government calls Global Adjustment.  By 2032 they will pay another $133 billion or $170 billion over 26 years”. 

It’s almost impossible to square those numbers, and to rationalize it because it’s so outlandish.  To make matters worse, when your own experts have been telling you not to do this and that your plan is horribly flawed, but you chose to ignore the council for ideological reasons, it is the highest form of tax payer contempt. (more…)

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0 Comments Choices We Make – Elections

Article written by on the 16 Oct 2015 in Canada,Current Events,Politics

On October 19th, Canadians will choose who will lead this this country going forward. Assuming there’s a majority, a rather large assumption given current polls, Canadians will have to live with their decision for four years. Irrespective of the choice Canadians make the world will not come to an end the day after the election. The leaders of the three major parties would try to have believe otherwise, but the truth is there is very little truth in politics, and even less so during a campaign.

I was eligible to vote for the first time in 1978, and since then I have never missed the right to exercise my franchise. I never understand when people say, “What’s the point of voting, it’s not going to make any difference”. To me the point is that we have the right to vote, and that never should be taken for granted. To illustrate how precious the right is; take a moment to take stock of the oppression and brutal disregard for basic human rights around the world today. In parts of the world the oppressors will allow access to Facebook, but allowing an election which will determine who the leader of their country will be?  Well, that’s just a notion too far. Technological advancement is a by-product of society’s enlightenment, and nothing contributes to that more than the simple act of marking an X on a ballot. 

I do understand why voter cynicism and apathy exists. We all know, or least came to expect that politicians are less than truthful. They will say whatever is necessary to get a vote. Therefore, many voters to decide who to vote for based on whom they dislike the least. I must confess, (more…)

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1 Comments Bank of Canada: One Change and Done.

Article written by on the 06 Mar 2015 in Canada,Current Events

That’s not exactly what we have come to expect from the Bank of Canada.  For years it’s been none and done.  Historically when the Bank of Canada makes an adjustment to the overnight lending rate, up or down, it’s not normally a one shot proposition.  So why the change?  Well, for now there was no need to lower the overnight lending rate.  Financial and economic conditions have improved since the last rate cut.  Still somewhat tenuous but not as dire as some were suggesting.  Here’s how the Bank of Canada rationalized not making a change to the overnight lending rate, “The oil price shock has had a modest early impact on aggregate demand, and a larger effect on income.  The Bank continues to expect that most of the negative impact from lower oil process will appear in the first half of 2015, although it may be even more front-loaded than projected in January.  Nevertheless, data for 2014 as whole suggest the anticipated rotation into stronger growth in non-energy exports and investments”.

One doesn’t require expertise in breaking ciphers to decode the Bank of Canada’s position. Simply stated, there’s still concern about Alberta, relative to the price of oil, but the fallout and pain may be contained.  Also, there are always winners and losers when markets sectors fluctuate. So Alberta’s short term pain may be Ontario’s gain. Yes, it appears that the “have not” province may be in a position now to tuck away their tin cup and pencils – not for a moment do I think politicians at every level in Ontario will cease being the country’s most organized panhandlers, but the justification for handouts may become more difficult. (more…)

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1 Comments Time For A Deep Breath

Article written by on the 06 Feb 2015 in Canada,Current Events,Economy,World Events

One of the unfortunate by-products of the “information” age is that content is required, every minute of the day.  Be it 24 hour news stations, sports stations or online publications etc.  There’s no time to think things through.  In-depth research and analysis takes times, and nobody seems to have it today.  We live in a 24 hour news cycle, and the competition is fierce.  The more salacious or provocative a story is, the greater the chance that eyeballs will be directed to it.  Case and point, Alberta.  Our friends and colleagues in that province must feel like they’re under siege.  It’s a constant bombardment of the “sky is falling” narrative. This is not an “it’s not fair” sentiment an eight year old says that when you make them go to bed by 9:30 pm.  The shame is that there does not appear to be much balance in the news with respect to the price of oil, and the impact it will have in Alberta.  There are contrary opinions in this regard, but you have to look for it.

I came across an article which suggests that the price for a barrel of oil has hit bottom.  This is not a lone opinion, and one individual who is suggesting this has a wee bit of knowledge and credibility in this regard.  (more…)

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1 Comments BOC Rate Cut & Loonie Heads South – What does it mean?

Article written by on the 23 Jan 2015 in Canada

And if you’re a snowbird or you planned on spending March break in the U.S., it’s going to cost you a lot more.  The Canadian Dollar’s decline does not come as a surprise. The Loonie may be worth 82,81,80,79, 78 cents – it will all depend when and what time of day you read the blog.  The Loonie is referred to as the petro-dollar, so when the price for a barrel of oil falls by 51%; it shouldn’t come as surprise that the Loonie moves in lockstep.  What did come as surprise is the Bank of Canada’s decision to cut the overnight lending rate.  Some had predicted this could happen in 2015, but no one saw this coming so soon into the New Year.  It’s bit of shock to the system because the overnight lending rate has remained unchanged for over four years.  Every announcement from the Bank of Canada has been the same; “move on folks, nothing to see here”.  Well, there’s something to see now.

The cut to the overnight lending rate is not good news.  The cut was necessitated because of the fragility of the Canadian economy.  The Canadian economy grew by 2.4% in 2014.  The Bank of Canada has now re-forecasted its growth for 2015 to 2.1%, and 1.5% in the first six months.  Ouch!  Our economies dependence on natural resources has far reaching consequences. Oil equals jobs, jobs equal consumer spending, and consumer spending equals healthy real estate values. It’s a game of dominoes that the Bank of Canada would like to avoid.  So, a way to offset the some of the oil risk is to support other sectors, like manufacturing and exports.  Some pundits are suggesting that the Bank of Canada is manipulating our currency to make our products more affordable to external markets.  Others are suggesting that the Bank of Canada does not have the ability to manipulate our currency. For the benefit of doubt… let’s call it coincidence. The Canadian dollar decline came just in the nick of time to support other sectors of our economy, and to minimize the potential of oil becoming a contagion.  Whew, we sure got lucky.

Back in early December I posted a blog entitled,Move aside Mortgage, There’s a New Worrisome Word”. I’m paraphrasing, but the gist of the blog was that 2015 was going to be all about oil, all the time. However, I assumed that we would have some time to ease into the consequences of cheap crude. I assumed wrong. It’s here now, and we all have to deal with it. One of the first things we as consumers should do is maybe alter our way of thinking.  I know this may seem counter intuitive, but lower interest rates and falling gas prices may make you feel good today, but it may end up making you much poorer in the future.  If you’re looking for one stat to follow, try the unemployment rate. It’s the number that tells all.

Until next time,



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0 Comments Cross Border Shopping

Article written by on the 12 Dec 2014 in Canada

For those thinking of doing some last minute Christmas shopping south of the 49th parallel, the “deals” have become just a little less attractive.  The Canadian dollar has now hit at a five year low.  The Loonie is now worth 86.70 U.S. cents.  Ouch!  That’s not to suggest there aren’t some folks cheering.

Since 2008, the manufacturing sector in Canada has taken its fair share of lumps, especially in Ontario and Quebec.  Given the value of our Lonnie today there’s less need for innovation and efficiency.  Not optimal from a long view standpoint but short term it will give many the opportunity to say, “hey world, buy our stuff because it’s cheaper”. Hmm, that sounds vaguely familiar.  Going forward chances are that export numbers will appear to be positive. That makes the Bank of Canada happy.  Now they can say they had nothing to do with value of Loonie, as some have suggested. Now they can point to one sector and say, “it’s because of what is happening in the oil sector”.  Right now oil is the new ugh!  The oil sector is getting hammered and it’s an integral part of our economy.  So for every yeah, there’s a yuck!

 The economic data suggests that the overnight lending rate is not going up, anytime soon.  That’s not to suggest that consumer rates won’t be increasing.  Just last week CMHC announced that the cost to securitize, CMB/NHA/MBS is going up.  So who’s going to eat the cost?  Spreads and margins are already compressed. So it might be difficult to rationalize further compression.  The most recent bank earning, with the exception of one bank, did not meet market expectations. Bank stocks are contracting, and they may be challenged to meet net income targets in 2015.  The dots are becoming a little clearer, making it easier to join them.

So if you are heading across the border this weekend to do some shopping, and the U.S. Custom Official asks you, “purpose of your trip?”.  Your response might be, “just want to say goodbye to my friends working at the outlet mall”.

Until next time,


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1 Comments My Journey to Fort McMurray

Article written by on the 31 Oct 2014 in Canada

Just lifted off for a quick trip to Fort McMurray, Alberta.  What takes me to Fort McMurray? Well, like everyone else on this plane, opportunity.  My fellow passengers are all predominately male, big lads, and there’s no doubt there off to do some heavy work.  I suspect when the beverage cart comes out no one will be ordering brie with a white wine spritzer.  I was just thinking the last time I was in Fort McMurray was, well, never.  I may have visited some 15 years ago, but it’s all blur now for me so I’ll go with never.  My knowledge of Fort McMurray is fairly limited but here’s what I know; oil and natural gas has created a boom town.  Salaries are well above average, and the work is hard, and home prices would be more suited in the Vancouver market place.  I was also surprised to find out that Air Canada has two direct flights from Toronto to Fort McMurray, daily.  That’s not to accommodate investment bankers but rather the men and women who do the real work, and a good number of them come from Eastern Canada.  It’s a long commute to work.

The natural resource sector makes a significant contribution to our economy, and not unlike the real estate industry in Canada, disruptions would adversely affect our economic growth. Bank of Canada Governor Stephen Poloz stated that plunging prices for crude oil could reduce our economic growth by a quarter percent.   Anything below $90 a barrel could cause job loss in the oil sector, and ultimately impact the real estate market.  So clearly the oil and gas sector is important to all of us.  We will always mumble and grumble when filling up.  Not unlike mortgages.  Everyone hates debt, but some debt helps to create personal wealth and is a job creator.

I really wish I understood what causes oil prices to fluctuate. I get why interests rates go up and down.  But the price of oil seems to be a market on to its own.  Setting aside the oil industries P.R. explanation of why prices are where they are, what’s the real reason?  The price for a barrel of oil today has hit a two and half year low.  Why?  Has the insatiable urge for crude by emerging markets waned? Don’t recall reading anywhere that China and India have said, “we got enough oil…we’re good”.  Have we changed our personal habits to such an extent that it would cause the price of oil to fall?  Has fracking in North America dramatically affected the price of oil in such a short period of time?  Everything I read is that there’s a glut of oil on the market today, supply outpaces demand, and logic would dictate that if oil industry slowed down the supply eventually the price would go up.  But the supply has not slowed down, so the question is why?

Today’s Oil Supply

I came across an interesting theory, and if it’s true, today’s oil supply has nothing to do with economics but rather geopolitical reasons. In short, here’s the theory.  Russia cast its wondering eye to the Ukraine, and annexed a portion of another sovereign nations land.  NATO wasn’t prepared come to Ukraine’s defense but steps had to be taken to ensure Putin thinks twice about expanding his reach elsewhere.  It’s been well documented that the price of oil helps to sustain Russia. Close to 50% of Russia’s budget depends on oil being priced at $100 a barrel.   So how does the west punish Russia for it’s illegal occupation of the Ukraine? You glut the market with oil.  Does the U.S. still have enough influence over oil producing countries to manipulate the market?  Who knows for sure – but what is known is it happened once before.  The fall of communism was credited to Ronald Reagan, the Pope, Lech Walesa and Gorbachev.  All key players, but was not widely reported was that the U.S. convinced Saudi Arabia to glut the market with oil at that time. This played a key role in almost bankrupting Russia, and forcing them to say “we surrender, communism nyet“.  What did Saudi Arabia get in return? A promise from the U.S. that they would always have their back, and they would never have reason to fear their neighbors.   

What does this all mean for us? The U.S. and Canadian Central Banks continue to say exactly what they’ve been saying for what seems like forever.  Overnight lending rate will not increase until data unequivocally supports full economic recovery.  Key data with the price of oil, and its impact to the Canadian economy. Same old-same old. Interest rates are not going up in the foreseeable future. Oh, and one more thing…we’re all pawns in a geopolitical game of chess.

Until next time


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