Most Gold Miners are Cash Flow Positive: Is Canadian Media preparing Canadians for Tax Hike After the Pandemic Ends? – November 27, 2020,
There’s a lot of mixed reactions to what’s happening to the economy especially when it comes to the price of Bitcoin and Gold and this for me is an indicator that deflation is taking a firm grip and on the economy and entities are fleeing to what they believe will be safe assets when the economy gets some form stimulus.
My personal projections for Gold and Gold miners at this time is that it’s all smoke and mirrors, Gold miners are cash flow positive and many don’t even have to borrow from banks. Gold after all can be used as a medium of exchange and in fact, the cheaper Gold gets the more sales it’s going to get, mainly the people who are over-leveraged are selling Gold right now.
People have to remember how small the Gold market is and the current price of it. A lot of people investing in Gold and Gold Stocks want a quick flip, that’s not what buying Gold is all about, I tend to agree with the technical investors who buy and sell based on their indicators, the problem with them is that that the ‘Bear jumps out the window’ and because the indicators point to deflation, the technical investors don’t want to wait and quite frankly I don’t blame them.
What I’m finding very interesting about modern markets is their belief in liquidity, Germany has bet too much on the ECB, and based on the information I’m reading Germany is unwilling to allow the insolvent countries in Europe to increase government spending with Euro dollars.
What this tells me is some are betting on higher interest rates and others are betting on low-interest rates with massive government spending. With that said if the Government spending argument wins out this won’t necessarily be good for the private sector because as you’ll read below governments in Canada as an example are at war with small and medium-sized businesses
Now if you simply use common logic, in the short term a Costco, Walmart or Amazon are a way better bet than Gold? Lockdowns appear to be the norm and in Canada, CRB and various other forms of welfare are the tool of choice for all levels of government in Canada.
What’s good for the TSX is good for the argument of higher taxation and this is what I find to be the nail in the coffin. When I write about ‘Late Stage Socialism’ it’s the idea that growing the size of government when the evidence suggests deflation.
As a business person myself, the cost of government is always on my mind, it’s expensive, I pay the government more than I pay my employees, the government taxes me everywhere, and although the incentive is to invest for the future, it’s very hard to invest when your fellow Canadian customers and businessmen are short on cash and unable to work in some instances.
So some of my short term investments are now potentially long term risks. Because of higher taxes and existing government programs like the Canada Mortgage and Housing Corporation(CMHC) and the Bank of Canada(BoC) both of whom prop up commercial and residential asset prices, there is no room for deflation and being that austerity measures are off the table, it’s unlikely that any Government asset will be sold in fact some are calling for the opposite.
So now that Costco and Walmart will be used as a reason to tax the rich more via capital gains tax, we all know that socialists go after the low hanging fruit first, namely the indebted, insolvent low and middle-class earners who are making their retail purchases and paying retail prices.
Now that it’s pretty clear that Justin Trudeau has been and will continue to engage in malinvestment as you’ll read in the article below, some are calling to raise the general sales tax. I often write about British Columbia which in my opinion should be far richer than it is now, but I write about B.C because of regressive taxation it uses to pay to grow the size of their government.
An idiot could be the premier of B.C and make a profit in that province simply based on its geographic location, however, this is not true in most Canadian provinces. Alberta and Saskatchewan are richer than the rest of Canada based on government policy. You’re not as punished in those two provinces for being productive or innovative.
However in Ontario, Quebec, and most of Eastern Canada, you are punished for being productive and this is pre-pandemic economic punishment, so putting the tax back to 7% could stifle consumer spending. Taxing should be the tool of choice to pay for welfare spending, but Canada is engaging in quite a few economic negatives, the Liberals are spending/borrowing excessively, they’re lending money to their preferred corporate entities, they’re growing the size of government and they’re not condemning provinces for shutting down private businesses. Also, you have to remember that a lot of Canadians can’t pay their rents/leases without a government cheque which means that mortgages aren’t being paid via productive means either.
All of these DEFLATIONARY forces are at play which is pushing the price of gold down, but I like to remind people that without austerity measures, the price of gold will have to come back up, it’s very expensive to pay for the Canadian government and if Joe Biden does, in fact, become president-elect, the Canadian dollar will continue to rise, and the cost of living in Canada will rise with it.
Now if the Canadian dollar is rising next to the U.S dollar and the Canadian cost of living is rising, ask yourself is that good news for Canada’s private sector which is heavily dependant on the U.S? I’d argue that if the Canadian dollar rises the Bank of Canada will have to intervene, it wouldn’t surprise me if the Bank of Canada went negative.
I brought up Germany in this article for a reason, the German central bank similar to the Japanese central bank is negative, but the Germany economy I’d argue is more robust than the Canadian economy, they have buyers for their finished goods and services, in Canada, we sell a lot of commodities and energy mainly to the U.S.
Under a Joe Biden presidency, Canada becomes a much better place to PARK your money. In my personal opinion, all of this, in the long run, looks good for Gold and bad for the Canadian consumer. But in the short term, I think the current market is a perfect indicator of market conditions.
Posthaste: Ottawa’s spending plans threaten a return to 7% GST, new report warns | financialpost.com
Interesting times ahead