The concept is straightforward. Buying low and selling
high is the pinnacle of investing success. The problem is
that humans are trying to execute on the strategy.
We tend to fall prey to the minutia and forget the fundamentals as
the fear component of the “fear and greed” drivers in economic de-cision-
making tends to be the dominant partner. While, ultimately,
the decision always lies with the player, trying to keep the headlines
out of the decision-making process distracts us. And that’s where we
need to be more critical consumers of news, especially stories from
the national media.
Arguably, we have passed the bottom of the global commod-ity
cycle: oil rose by roughly 30 per cent in the month of March
alone. Zinc and ferrous prices have been rising since mid-Febru-ary.
Coal is up and so are forest product prices. (For those seeking
deeper insight into the numbers and trends, the economics arm of
Scotiabank is the nation’s leader in tracking commodity moves and
publishes a monthly report on global commodity movement).
Normally, moves such as these would be something to crow about
but to listen to the news, particularly the national media, you’d
think Saskatchewan is spiralling into a sinkhole. Generally speak-ing,
Toronto media people boast a relatively shallow understand-ing
of the national economy. They tend to be Ontario-centric and,
perhaps more importantly, they are not business people. They are
consumers, employees whose contact with the economy tends to be
restricted to the retail world. They shop, they don’t invest. They look
at the world through the eyes of consumers, not investors. Yet, we
give their comments on the economy credence.
So, watch for catch-all phrases like: “in these uncertain econom-ic
times.” In three decades of commenting on business and econom-ic
affairs, I have never heard a reporter say that things were certain.
Now that would be news. According to them, all times are uncertain
for the economy, relegating the phrase to the useless file, having vir-tually
no meaning. It sounds scary, though. This makes it a report-er’s
friend, especially for a scribe who’s been assigned a story on the
economy but has little to no understanding of the subject matter.
Another case in point is how the national media also likes to put
Saskatchewan and Alberta in the same envelope. After all, both
provinces are out there – out West somewhere – so they say things
like the oil-producing provinces of Alberta and Saskatchewan. Well,
yes we are both oil producers but Saskatchewan is more than oil. It’s
about potash and mining generally. It’s also about agriculture and
so on and so on. But your average news anchor in Toronto probably
couldn’t make that differentiation.
The fact of the matter is that while Saskatchewan is stinging from
the downturn in commodities, our sister province of Alberta is in
trouble because of it. We simply are not in the same boat. Alberta’s
economy will see between two and three years of contraction before
a turnaround. Saskatchewan is in the turnaround already with most
forecasters saying last year produced a contraction of less than one
per cent in provincial GDP. 2016 will be flat or slightly positive and
next year will see a return to growth of more than two per cent.
As one economist explained it, of all the oil producers,
Saskatchewan will see the smallest dip and the
shortest recessionary period.
To put it another way, we’ve reached the
bottom of the commodity cycle and the
long climb now begins. For those try-ing
to execute the buy-low-sell-high
theory, the time to embrace funda-mentals
and economic research
at the expense of headline gener-ating
noise is upon us. The low
has passed. The drive to the high
is underway.
Business commentator Paul
Martin is the Saskatchewan
chair of The Executive
Committee (TEC) Canada
Ltd. and is heard on more
than a dozen Saskatchewan
radio stations daily.
ABSOLUT/SHUTTERSTOCK.COM
THE BOTTOM LINE
Don’t Believe Everything
You Hear – Or Read
“The fact of the matter is that while
Saskatchewan is stinging from
the downturn in commodities,
our sister province of Alberta
is in trouble because of it. We
BY PAUL MARTIN simply are not in the same boat.”
56 Think BIG | Quarter 2 2016 | saskheavy.ca
/SHUTTERSTOCK.COM
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