Weak Consumers, Big Deficits, and Ottawa’s New Industrial Policy
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What is the main topic discussed in this episode?
Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business.
Just my reminder to people who own cyclicals, don't be surprised when there's a cycle.
If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time.
If you're listening to this in recording format, there is 20 minutes of me and Simone talking on, you know, recorded on YouTube, X, et cetera. And you can go and listen to it there. Just, you know, caveat that, or just full disclaimer, it might hurt your ears a little apparently. Exactly. Yeah, now we have people commenting saying that it's much better now. So the thing that I want to point to based on what you mentioned was that, you know, I've mentioned this a couple of times, but the percentage of the consumption that comes from the top 10%, right? I think central banks should be paying attention to this, but it feels like it's easy for them to still be fearful of resurrecting inflation or letting the economy run too hot and continuing to pull more disparate wealth.
They almost are forced to let it really burn from the bottom. and start trying to pull that huge disparity in asset inflation down with it. I think they kind of just have to let this whole thing run its course, unfortunately, which is scary, man. It's kind of like, I don't know. Look at this. Yeah. So what's that? Consumers who think inflation will be above 3%. Is that Canada or the U.S.? Yeah, that's Canada.
So that's the Bank of Canada. So for those watching live, the easiest thing to do is green or lower. is good so it's basically bank of canada target or lower even looking at deflation for part of it but if you're getting red or higher you're looking at well above the bank of canada target so three to five percent or five percent above and just looking roughly here you're looking at yeah about 60 of people that consumers think it's going to be 3% or more, which is definitely concerning. And I don't blame people. If you go to the grocery store and obviously even looking at CPI data that comes out month after month, it's consistently above 3%. So if you're middle class or lower income, this is something constantly you see that, you know, you buy $100, $150 worth of
stuff at the grocery store and you just feel like you're getting less and less for the amount that you pay. And I have a feeling that a big chunk of that is coming from grocery prices because that's something you see on a very regular basis, at least once, maybe twice, three times a week, depending how often you do groceries. Yeah, yeah.
100%, man. Same thing, oil. Oil is not over, man. It's just less topical because there's fewer bombs going off and stuff. But that's not even closed over and it's not going to get pushed through. So the two things that people buy most, and even if you go to the three, you also have shelter, right? Shelter inflation, all these new mortgages resetting and all of this stuff. Let me quickly pull up that chart that I mentioned because I think this is one of the craziest charts, man. Yeah. top 10% versus bottom 80% of the economy. Again, it excludes the 10% in between those two, but top 10% record and almost half of all consumer spending. Consumer spending, right? So the problem is like at a certain point, this stops scaling.
And you've seen kind of periods where you can see it start to stop scaling and it corrects quite a bit. And then your bottom kind of recorrects. But you go back to like normal economies, like they're in tandem, right? And they're both kind of like whatever, 4D, The fact that your top 10% is propping up the economy that much, how many more trips and yachts and whatever and plane tickets and hotel rooms can they buy to keep the consumer side of the economy stimulated? I'm of the opinion that there's a limit to the upside of this.
How worried should we be about rising consumer inflation expectations in Canada?
Oh, yeah. And at a certain point, the bottom 80% does become a metric that can put a downward drag on the economy more than they can put an upward drag on it.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:01–4:08
2
How worried should we be about rising consumer inflation expectations in Canada?
4:08–13:15
3
Why is the top 10% of earners driving a growing share of Canadian consumer spending?
13:15–26:30
4
What do recent employment numbers reveal about part-time, youth, and full-time job trends?
26:30–28:22
Speakers
3 identifiedMore from The Canadian Investor
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