Page 26 - Newcom

NOVEMBER 2020
PAGE 26
EDITORIAL
Bracing for unrest in the U.S.
Ordinarily, a U.S. presidential election would be a market-moving event. But this year, thanks to U.S. President Donald Trump’s efforts to discredit voting by mail, the likelihood of voter sup-
pression and no assurance of a peaceful transfer of power, the U.S. election also represents a large, foreseeable geopolitical risk.
Financial advisors who aren’t preparing their clients for the very real potential for civil unrest in the wake of the U.S. vote — and the ensuing market turmoil — clearly haven’t been paying attention.
While election day on Nov. 3 represents a deadline of sorts, that date may just be the beginning of the turmoil. Political analysts warn that the results of the election may not be known for days, if not weeks, given the prevalence of mail-in balloting this year. The results on election night could change as more votes are counted.
In addition, analysts are raising the spectre of efforts to exploit the vagaries of the U.S. electoral college system to override the will of vot- ers. Theoretically, state electors can choose to ignore the results of the
EDMONTON
polls in their region and instead cast votes for president based on the state electors’ own interests.
The widespread appearance of so-called “faithless electors” could leave the results of the election to the courts, creating a new reason for partisan conflict, civil strife and potential violence in the streets. At a time when so many democratic norms are being violated, the long his- tory of relatively calm U.S. elections is of little comfort.
There’s no way to predict how the U.S. election will play out, but atten- tive advisors have had plenty of notice about the potential for political chaos. And while no one knows how to prepare for an unprecedented event, many strategies used to shore up portfolios for Covid-19 volatil- ity should apply: reminding clients of the principles behind their plans, double-checking risk tolerance and erring on the side of caution.
If chaos ensues, no one can claim they didn’t see it coming. As an advisor, your job is to hope for the best — but prepare clients for the worst.
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As Alberta reels, Kenney’s approval rating plummets
Voters are unimpressed with the premier’s response to the pandemic and low oil prices
BY MICHAEL GANLEY
alberta premier jason kenney is
beginning to reap the whirlwind of his government’s aggressive — and exten- sive — policy decisions. Kenney’s public approval rating has plunged as the prov- ince staggers under the weight of low oil prices, the Covid-19 pandemic and the provincial government’s skirmishes with educators, rural municipalities, doctors, nurses and other health-care workers.
Most recently, the governing United Conservative Party (UCP) put rural muni- cipalities on the financial precipice by announcing a three-year break on property taxes for the oilpatch. Industry lobby group the Canadian Association of Petroleum Producers estimates the move will save its members — and, correspondingly, cost rural municipalities — up to $80 million.
This is on top of a $20-million property-tax relief program the province announced last December to support shallow-gas producers, the downloading of policing costs from the province to rural municipalities and an unresolved $173 million in rural property taxes that oil and gas producers have refused to pay during the economic downturn. Now is a tough time to be a local reeve.
All of this has led to Kenney’s support plunging to just 38% this past September
from 60% in September 2019. (Both polls were conducted by the Angus Reid Institute.) Kenney now has the second- lowest approval rating of any premier in the country at a time when most have seen a pandemic-induced boost in popularity. The polls put the UCP in a dead heat with the opposition NDP.
Kenney, as usual, has come out swing- ing, claiming his policy moves were neces- sary in a province that has seen revenues plummet. Alberta now expects a record deficit of $24.2 billion this fiscal year — $16.8 billion higher than what was esti- mated in February’s provincial budget.
Kenney instinctively rails against the federal government and treats support for the oil and gas industry as an arti- cle of faith, chastising anyone who raises concerns about unfunded liabilities or ineffective corporate tax cuts. But get- ting further into bed with the oil and gas industry will do nothing for the prices of oil and natural gas, which remain the biggest determinants of Alberta’s financial health. Neither Kenney nor the federal government can do much to influence those prices.
Even the traditional bugaboo of insuffi- cient pipeline capacity has lost its lustre, with both the Trans Mountain pipeline expansion to Vancouver and the Coastal GasLink pipeline to Kitimat, B.C., proceed- ing apace. When you include the work being done on Enbridge Inc.’s Line 3 replacement to the U.S. Midwest, there will be plenty of takeaway capacity for both oil and natural gas from Alberta soon — and that doesn’t factor in the possibility (however remote) that the Keystone XL pipeline proceeds.
Natural gas, the other bright spot for
Alberta’s economy, has enjoyed fair or good prices for months, and we’re only now head- ing into the peak-demand winter season.
As of mid-October, 40 of the 80 rigs in Canada were drilling for natural gas. The total rig count is down by 45% from a year ago, which is bad, but not nearly as bad as in the U.S., where the rig count is down by 69%.
“Natural gas stocks have held up better than oil names during the correction over the last few months,” according to energy sector analyst Josef Schachter, who antici- pates “strong [natural gas] prices this win- ter as storage in Canada is below normal.”
The recently approved $2.3-billion expansion of the NOVA Gas Transmission system between Grande Prairie and Red Deer, which allows more natural gas to flow to the U.S. and overseas, has also sup- ported the price of natural gas.
Alberta faces long-term challenges as the world transitions from reliance on fossil fuels for transportation, a real- ity Kenney grudgingly acknowledges. But there will be a long, powerful tail to both the oil and natural gas industries in Alberta, leading to many peaks and troughs in prices along the way. IE
Getting further into bed with the oil and gas industry will do nothing for oil and gas prices