Those who realize it are best able to adapt, says Michael Campbell
by Greg Klein
Maybe it’s a sense of the absurd that drives his humour. Michael Campbell says we live in a time of momentous change that few people, let alone governments, really understand. Not only has Chinese economic growth slowed but the West staggers under high unemployment, migrants threaten to swamp Europe and terrorists slaughtered over 32,600 people last year alone, he says. Then there’s the demographic conundrum. But how does Campbell illustrate it? By relaying comments from Dave Barry.
“Nowdays there’s more money being spent on breast implants and Viagra than on Alzheimer’s research. This means that by 2030 there should be a large elderly population with perky boobs, huge erections and absolutely no recollection about what to do with them.”
Campbell’s funny but he’s an analyst to be reckoned with, judging by a bio that claims credit for “advocating picking up blue-chip dividend-paying stocks in every major dip since 2011, getting out of gold in September of 2012, recommending U.S. dollar-denominated assets in December of 2013 and getting out of oil stocks in January of 2014.” The man behind Money Talks regaled a December 8 lunchtime audience by interspersing grim news with humour and hope for the future. Hosted by the Association for Mineral Exploration British Columbia, the 100-strong crowd heard less about their own industry than about wider economic issues affecting everyone.
“We’re living in the demise of the welfare state,” Campbell maintains. “Governments have made promises they’re never going to keep.” In Canada, all three levels of government persist with tax increases while cutting services.
Getting back to demographics, the problem wasn’t acknowledged during our recent federal election. Yet Campbell says we’re stuck with an unfunded $244-billion liability for public sector pensions. “Twelve hundred Canadians turn 65 every day, 10,000 every day in the States. We’ve got more people over the age of 65 than under 15…. Health care costs are growing faster than government revenues.”
France, an especial bête noir of the Campbell worldview, hasn’t balanced its budget since 1974, he says. Its socialist government raised taxes 87 times in its first two years. Tax-and-spend governments ultimately face financial collapse, as is already happening in some countries and municipalities. “The status quo in government cannot be maintained.” The demise will last a few more decades but is already underway, he says.
Campbell says taxaholic governments act on “the Willie Sutton mandate.”
According to the story, the serial thief once answered simply when asked why he robbed banks: “Because that’s where the money is.” Hence governments go after successful businesses and individuals.
That policy won’t go down without a fight, Campbell says. “And the impact on economic growth and personal finances will be huge.”
[Governments show] no sign that they understand it’s not business as usual…. They don’t get it.
Yet governments show “no sign that they understand it’s not business as usual…. They don’t get it.”
They’re not the only ones. Campbell quotes investment analyst John Mauldin as saying, “We believe what we want to believe because to do otherwise would upset our world. The potential emotional stress of a contrary opinion is too much for us to deal with. So we go along with the least stressful emotional choice.”
Campbell says in September 2012 he advised a few major gold miner CEOs to hedge some production. “But they didn’t do it.” He thinks they found the warning “too emotionally painful.”
“Oil is even more blatant,” he says. “I don’t know how they could miss this incredible supply increase coming out of fracking, coming out of the oilsands. Those numbers were really readily available. You couldn’t think that oil would be able to withstand that, then you add two more components,” a rising U.S. dollar and dropping demand.
Looking at currencies, he says the key to comprehension is that “confidence moves money” and the U.S. dollar still maintains confidence. Of its closest competitors, Japan suffers severe demographic and debt-to-GDP problems. “I personally think the euro is going to go much lower.” Canadian, Australian and New Zealand dollars will continue to fall.
[The Canadian dollar’s] next number’s 66, the next number’s 62, the next number’s 55.
Having predicted a 70-cent Canuck buck for three and a half years, he says, “the next number’s 66, the next number’s 62, the next number’s 55.” Against that, he foresees a spike in the U.S. dollar.
As for commodities, he thinks they’re still headed toward a bottom in U.S. dollars. But there’s good news. “In Canadian dollar terms, we may have already been there.”
The resemblance to his brother, former B.C. premier Gordon Campbell, helps prompt the question of how he’d fare in politics. As he moves back and forth across the stage, irreverently castigating the status quo, one can’t help thinking he’d bring a refreshing change to public discourse. But eventually it becomes clear that our chattering classes would have no place for him.
Anyway, the ideological outsider evidently sees himself on the winning side. Pointing out that people are increasingly turning to business for education, security and health care, among other services long associated with government, Campbell says, “As government goes down, recovery will come from the private sector.”