Will 2025 bring another bull market or a long-overdue correction? James Connor sits down with Jonathan Wellum, CEO of ROCKLINC Investment Partners, to break down the risks of stock market overvaluation, the economic divide between the US and Canada, and the sectors poised for growth, including energy, uranium, and precious metals. Jonathan also examines how inflation, government deficits, and political shifts could reshape the markets in the year ahead. Don’t miss this essential guide to navigating 2025’s opportunities and challenges.
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Jonathan Wellum 0:00
The stock market is very expensive, and people need to be careful. You can have a rip roaring economy and a weak stock market. I think that’s more likely what we’ll probably see.
James Connor 0:13
Hi and welcome to wealthion. I’m James Connor. Do you need help with your financial planning? For 2025 consider having a discussion with a wealthion endorsed financial advisor. You can find out more information@wealthion.com slash free. Once again, That’s wealthion.com/free now let’s get on with the show.
James Connor 0:37
Jonathan, thank you very much for joining us today. How are things in Toronto? Things
Jonathan Wellum 0:40
are going quite well. I mean, a little upheaval up here in Canada, as you know, with our government, and some changes more recently there and battling a little larger deficit, but putting aside the political area, I think not too badly up here, we’ve enjoyed a good year. So
James Connor 0:55
let’s talk about a few things. And since the last time you and I spoke, I think it was maybe four or five weeks ago, but so much has happened, not only in the US, but especially in Canada. And we have a potential trade war breaking out between Canada and the US. Trump also wants to make Canada the 51st state, so I want to hear your thoughts on that. And we also have an impending collapse of the Trudeau Government, and the S P and the Nasdaq continue to make new highs every other day, and given the US has been so strong this year, why don’t we start right there? Tell me, what are your thoughts about the US markets and also the economy, and where do you think things might be going in 2025
Jonathan Wellum 1:36
Yeah, I think we need to make a separation between the US economy and the stock market, just for a moment here. So basically, the US economy has been chugging along reasonably well, particularly if you can, if you can put it up against the other economies around the world, Europe, Japan, China, Canada. For that matter, it’s been growing fairly well, not spectacularly, but fairly, fairly strongly. Again, you’ve got massive deficits. So you have seven half percent, you know, debt to deficit to the GDP. So it’s had a lot of stimulus, and that’s resulted in some, some, you know, reasonable growth down there. And so, so when we look at that, I mean, the stock market is reflected, you know that, and more valuations are at higher levels. We all know that. You know, the average s, p, you know, 500 stocks are trading at 2324 times earnings, which is, you know, fairly close to a high. And so valuations are rich, and the economy has been, I think, you know, as I say, reasonably strong. So we look at that, we look at that, and we say, Okay, now you got Trump coming in, and Trump is going to, I think, be a boon for growth in the United States. I mean, it’s, it’s impossible not, not to, not to think this, I from our perspective, he’s going to cut regulations, he’s going to cut taxes, he’s going to try to slash inefficient parts of government. He’s going to try to drill, drill, drill. And so energy prices are probably going to sneak lower, and that’s good for everybody, including all the manufacturing base inflation numbers and so forth. And this is encouraging a lot of capital, capital to come back to the United States. And so if you’re talking to investors, you’re talking to, you know, the hedge fund managers who look talking a lot of these companies, you’re, I mean, even, even recently, he had that conference with the Softbank CEO, who’s going to bring back, you know, bring in the country, invest $100 billion people want to invest, but you have to give them a reason to invest. And I think Trump will give people a very, very strong reason to invest back in the United States. And so I think this is going to be very good for the United States and for the economy, and it couldn’t come anytime. You know better about a better time, because, of course, their debts deficits are too high. They’ve got to rein those in, and they need economic growth, or their debt to GDP ratio is just going to spiral even more out of control. So I think those are all good things. So I think the economy in the States will do quite well. Our issue is that valuations in the stock market already reflect a very rosy picture, and that the rest of the world is not doing that, doing that well. And so we think the stock market generally will go sideways, if anything, and it’ll be a lot harder, you know, tougher slugging. And so when we look at the stock market in our investment positions, we’re really focusing on good value, strong balance sheets, companies that have good secular growth, maybe ones that haven’t benefited the last couple of years as much, where we can find value in the marketplace with lower expectations for strong stock markets in the Us. But having said that, I think the economy actually will do quite well. But I think you will you things will move in different directions this year. I think stock market will have a tough, tough slug the economy do better, whereas the last couple of years, we’ve had total in confidence in Washington, similar to what we’ve seen in Toronto, in Ottawa, and yet, the stock market has done well with all the liquidity. 80 and, and so that’s sort of our view as we look at look at the US situation.
James Connor 5:04
Yeah, it is amazing how well the stock market has done in the US in the last two years. Now it was up 25% in 2023 it’s up another 25 plus percent in 2024 and and it’s just in spite of the incompetence that we have in Washington, it’s amazing. The markets have done so well. And I guess this is one of the things that has really surprised me. If you go back a year, you know, one year ago, this time, and everybody was looking for a recession in the US, and we never got it. And it’s nowhere near a recession. It’s, you know, the economy is still growing at two to 3% the unemployment rate is around 4% which is way below the long term moving average. What are your thoughts? Do you think I’m going to put you on the spot now? But do you think 2025 can be another big year in the stock market?
Jonathan Wellum 5:58
Well, again, as I said, it could be anything is possible. But when you’ve had back to back years of 20, as you’ve already pointed out, 26 27% compound rates of return for the last couple of years, to have a third year, that takes you, you know, high double digits, like into the teens, or even up to 20% similar to what we’ve had the last two years, it’s possible, absolutely it’s possible. And we saw that, I think in the late part of the 90s. We saw it in the I think in the 80s, again, there’s been a couple of time frames where you have had three years, where you can really have back to back numbers, and everybody’s shocked by them. But when we entered Wait, when we entered the last couple of years, the stock market valuations were already rich, and they’ve never been richer than they are now. And so I think to have another, you know, a third year yet, is possible. I think it’s improbable. And I think as investors, we should be really conscious of that and careful when we’re allocating capital, not to just continue to throw caution to the wind, but to really look for value. Maybe keep a little powder dry, some cash around, so that if there’s volatility, you can take advantage of the volatility. That’s what we’re doing. We’re not going to bet on another, you know, spectacular, you know, a third year in a row, given valuations and given the global environment, which is, which is under a lot more, a lot more stress. And
James Connor 7:18
Jonathan, when you reflect back on 2024 what surprised you the most?
Jonathan Wellum 7:24
I think the stock market performance surprised me probably the most in terms of the robustness of the stock market and the fact it just kept edging higher. It was almost impossible to stop it. And so that that certainly surprised me. I mean, we had the inverted yield curve. And of course, everybody, as you pointed out, you know, recession is coming. Recession is coming. Recession is coming. It certainly looked like that was coming. We had slow down in many economies around the world. And the fact that the US missed it again, I think it was because it’s seven and a half percent deficit to GDP. There was so much stimulus in the economy. And, I mean, the US economy is still a very robust economy. It’s very, very entrepreneurial, still, even with all of the interference by the governments and so it, you know, hung in there, and even with the interference from the Biden administration in terms of oil production, I mean, they’re still at a record oil production, even with all of the interference and all the regulations. So it just shows again, how robust the economy is, even in the face of a lot of opposition out of Washington. That’s why, I think when you when you put the quality of people that Donald Trump has put around him, and the leaders that he has instead of the DEI hires that you know, sort of inculcated the Biden regime. I think that’s going to be really good for the American economy over the next couple of years. I think people are going to be very surprised by the amount of capital that flows back into that country. And that’s what the name of the game is, capital investments. We got to have capital investments. We have to drive productivity. AI is going to be a big one. And that’s, I think, going to make a big difference in the US is going to be a leader all of those areas, and I think that’s going to be good for the US. Having said that, the stock market is very expensive, and people need to be careful, you can have a rip roaring economy and a weak stock market. And I think that’s more likely what we’ll probably see.
James Connor 9:16
I was reading some research recently, and it was just talking about the S P in 2024 and the strength every sector within the S P was up on the year. And of course, that could change in the next few days, I guess. But I was really surprised to see that, and because we keep hearing about how we had this high concentration of stocks in the US, right? And that might be true, but every sector within the S P was up on the year, the number one sector. No surprise, technology that represents 33% of the S P right now, and I was surprised to see the second best performance sector. Do you care to guess what it might be?
Jonathan Wellum 9:58
Yeah, I’m not sure. Um. I you know, and I’ll let you I’m not gonna guess.
James Connor 10:03
Now, once again, I was really surprised. It was financials. Financials, yes, yeah, financials have done well, yeah. And some of the names, it was like, massive moves. Goldman, Sachs, up 50% JP, Morgan up 40% KKR, up 80% PayPal up 50 and especially when it comes to the Canadian market and the Canadian financials, some of them have done okay, but nothing like the moves we’ve seen in the US. But what are your thoughts, and why did we see this large performance in US financials? Well, I
Jonathan Wellum 10:35
think there’s a couple of reasons. First of all, they were coming off low valuations, and so Goldman, Sachs and some of the investment bankers who are coming off low valuations and and they made a lot of money. The yield curve has improved for them. They’ve been able to make better spreads and so on. And the write offs, the, you know, the concern over debt and impairments really didn’t materialize for the larger players. I mean, we’re still, we still, still waiting to see all the commercial loans to get ready off right? And so I think that was just basically better news, better growth, and there was more pessimism priced into some of those securities. I think it was a lot of relief. And the numbers coming out of those stocks, especially the bigger, the bigger financial players in the States, were excellent in Canada, and also in the states, some of the smaller, more regional players, is really bifurcated. They’ve suffered more difficulties and haven’t done as well. In Canada, look at the difference between, say, a Royal Bank and a TD. I mean, you’re talking night and day. I don’t have the numbers at my fingertips, but I mean, TD would be probably negative for the year, and RB, RBC, or our Royal Bank would be up, what, 30% 40% I know, in some ridiculously large number. And so it’s hard to believe when you’ve got two banks that are fairly close. I mean, yeah, of course, there’s differences in the mix of businesses, but but fairly close when you consider their their leadership in the Canadian marketplace and and so forth, but vastly different results. And so you really do have to get the stock right, or you can, you know, not just the sector, and
James Connor 12:03
you touched on regional banks. And this is another concern. I was really surprised when I read about the financials and how strong they were, because it was a year ago when we had troubles with Silicon Valley Bank and a few other regionals. And yet the market just kind of shrugged that off and just kept going, yeah, that’s,
Jonathan Wellum 12:19
that’s what that’s. The market’s been very resilient. And that gets back to the fact that at some point here again, I’m not we’re longer term investors. We’re always deploying capital. We’re not trying to market time, but I do think people need to be ready for some pullback in the market. We have not had that to other than COVID for the last 14 years, and this is highly unusual, and so I’d love to see a little bit of a pullback. It gives you, this gives us opportunities to buy stocks at better prices and cleans out the marketplace. We don’t want it going one direction. And you also did point out, James, and quite rightly, I mean, the last, I think it’s really the last four or five months where the markets really broadened out, even the last couple of months. And so the Russell, you know, 2000 has it really, really jumped in the last month or two? And I think again, that’s indicative of not just the Magnificent Seven tech companies driving the marketplace all of a sudden with the Trump election and people looking at the broader economy, they’re saying, hey, you know, this is going to be better for some of the smaller market cap companies. Tax rates are going to be better, regulations are going to come off, and this is going to be good for the broader base of businesses, manufacturing businesses and and so that’s industrial companies, things like that. They should all do quite well. And so that’s, that’s, I think, a good thing too, to see the broadening of the market. We just cannot have a market that’s dominated by, you know, Apple and Nvidia and Amazon, Google and so forth. Yeah,
James Connor 13:41
and you’ve expressed a little bit of cautious or caution about 2025 and how are you positioning your clients portfolios? And have you increased your cash position?
Jonathan Wellum 13:54
Yeah, we’ve let our cash positions come up a little bit. And it, of course, it depends on the client. So if it’s a client, as a you know, a young client professional, adding to their portfolios, then we can have them, you know, 85 90% invested and chugging along. And they can dollar cost average, if the market goes, you know, a little while, or wild or volatile, if it’s an older client that’s retired and drawing down on their funds. Yeah, I know we’ve got them typically 60, 65% in equities, and we would have the rest in shorter term securities, interest bearing securities. Our view on interest rates is that they’re probably going to be higher for longer and I think that, as we saw again, this, I think this is a bit of a surprise for the market over the last year that you know the, if you look at the you know, the US 10 year, the US 30, they’re all up year over year. I think most people thought, you know, once you start sucking the low, low end of the curve down, it’s also going to pull the long end down with it somewhat. But actually, we’ve seen the long and go up and and so I think that from our perspective, we’ve sort of hit out, if you will, with our clients. We. Continue to do this in the 234, year range, and not trying to be overly heroic with our clients. We’re not trying to, you know, we’re not yield curve guessers and investors and trying to make, you know, extra few basis points there. But I think that on the longer end, I don’t think we get a pullback in the interest rates. And if anything, they could sneak up a little bit more if you’ve got the economy doing better in the US, and you’ve got also in the US, over ten trillion has to roll next year of government securities. I mean it, there’s a lot of debt out there, and it has to roll over, and the deficits are still quite large in most of the major countries around the world. And so hopefully the US attacks their deficit, but that that I think will continue to put in, you know, pressure on interest rates. And although, you know the Fed and the central banks are trying to get the short term rates down, it might be harder on the long end to get those rates down. So we’re careful and being, being very judicious there and when we are carrying the cash around with our clients accounts.
James Connor 15:59
So you touched on the possibility of higher interest rates in 2025 and I saw an interview recently with investor Paul Tudor Jones, and his quote was, all roads lead to inflation in 2025 so he’s long gold, he’s long Bitcoin and some other commodities. But I think his concern was that with Trump’s policies, even though we don’t know exactly what they’re going to be, he’s concerned that lower taxes, higher tariffs and also a reduction in immigration is all going to lead to higher prices and higher inflation. And what are your thoughts on on inflation?
Jonathan Wellum 16:38
Yeah, I think inflation is one something that we need to watch very carefully, and it is harder to break than a lot of people think, particularly when you have the indebtedness that we have. We mean, we have three, $50 trillion in debt in the world. I mean, they were taking speaking or globally, in all three levels, you know, government, business and individual. So that’s a lot of debt and and just service that debt is very, very difficult, and so I think most people are concerned about them trying to inflate some of that away. And, you know, can we really get, you know, that far removed from printing money and adding money to, you know, the central banks adding to the money supply? So that’s a big concern now, in terms of tutor Jones and the issue, he says, with Trump, yeah, I know we have to watch how this unfolds. I guess I would look at it and say, Yes, that’s definitely something that we need to be concerned about. But one way of dealing with inflation is to produce more goods. I mean, you produce, you have to, you know, production The problem with many of our economies, Canada, United States under the Biden regime, Canada under Trudeau regime Europe, under the current regimes, they have over there, it’s all redistribution. They’re not about producing. And if you’re in a reproduct, you know, if you’re just in a redistributory economy where you’re not focusing on production, then you’re not going to produce more, and you got to you’re going to have less to produce, and you’re going to bid up the prices of what’s there, and you’re going to give out lots of free things. And that this has been the problem with the socialism, which is just killing our economies, and why you’re getting such an uprising, I think populism that we need to get back to producing goods and services. And that’s what Trump wants to do, supply oriented, pump up the supply, and that also will deal with the inflation issue. At least it will help deal with the inflation issue. So it’s going to be the balancing of those out. How fast can you crank up, you know, the production of oil? How fast can you bring in the capital to produce more manufactured goods at lower costs and with better inputs, and you don’t need as much human labor? So, yeah, if you’re deporting illegals and people that are doing nasty things in your country, they shouldn’t be in your country. That should not impact your labor costs. If you’re investing in labor saving technology and employing your own people. So I think some of the things that these guys raise, in my view, are they’re overstated. They’re and I think that the best thing to do is get back to basic economics, and that is, produce, produce, produce, make production easier, similar, you know, to the housing market. Don’t drop the regulations. Open up land, make sure the energy costs are down, unleash the builders on properties and go for it. This is what we need to do, instead of tying everybody up and all the businesses up with, you know, the latest ESG and the latest, you know, this, that and the other thing. And so I think that’s what a lot of voters are pushing back against. And I think in the United States, we’re going to see a much more productive economy. Hopefully, that’s what I’m hoping for. The same thing here in Canada, if we have a have a regime change. And in what we’re seeing in Argentina, what we’re seeing over in Europe and Italy now changes there. Germany is in big, big trouble because of their socialism and energy costs, and there’s going to be a backlash there. So these things, I think, will lead to more productive, more efficient economies and hopefully smaller governments.
James Connor 19:46
Yes, I had a conversation with Felix zuloff recently where we were talking about other regions of the world, and I was surprised that I didn’t realize how weak China was. For example, at one point it was growing at 10% i. Now it’s down to one to 2% depending on whose research you read. We went through many of the European countries, Germany, they’ve been in recession for two years. France, that might be in worse shape than Canada, I don’t know, but it’s amazing how well and how strong the US has been doing. In spite of these other regions of the world,
Jonathan Wellum 20:18
it still has the most dynamic market. And if you think of, if you think of China, there’s, it’s impossible for China to maintain the kind of growth that they’ve had over the years when it’s run by a communist state. So if you don’t have a dynamic free market, allocating capital across and letting millions and billions, you know, millions and hundreds of millions of people make those decisions, but you have a you have the Politburo, if you will, or the small number of people making those decisions, and then you also have a declining population because, you know, they had the one child per family policy and implemented back in 79 that’s now run its course. So now they’re in population shrink, and you are and you’re allocating capital based upon, you know, a basic, you know, communist group of folks that meet around a table and not a free market. It’s impossible. China is going to be in mass they are in massive pain, and getting out of that will be brutally difficult. And so you in the United States, you’ve got a deep, deep capital markets. You’ve got a free market that still allocates capital based upon the wishes of individuals and not the state. And that is the way you go if you want to produce wealth. And so I think countries like China, yeah, you be watching them. They’re very, very weak, and it’s gonna be very difficult to get out of that, because they have allocated capital for the last 2030, years inefficiently and ineffectively. They’ve built stuff when there’s not an ROI on it. If you’re building things and you’re getting infrastructure and you’re not thinking about your return on investment, then you’re squandering that money and and that’s that’s a big problem around the world. So again, I think this is what we hope for the next number of years, we go back to more freer markets, and free up the capital and let the capital flow where it’s where it should go, where it’s going to be treated the best and get the highest rates of return, and people will do much, much better and and prices will come down and will become much more efficient. So
James Connor 22:06
that’s enough for the US. Now, why don’t we move on to Canada?
Jonathan Wellum 22:11
That’s where you are. Beloved Canada. Yes, yes. Well, I think, actually, I’m looking forward to 2025 I think we could really see some wonderful things in Canada. Yeah.
James Connor 22:20
So so much has happened in the last couple of weeks. I don’t even know where to begin here, but why don’t we just start with the Trudeau Government, and for those who might not be aware of what’s happened here, why don’t you just take us through the last couple of weeks and some of the major events?
Jonathan Wellum 22:34
Yeah. I mean, even if we go back to when, when Justin Trudeau was first elected in 2015 Canada was an incredibly dynamic economy. It was very wealthy. You know, our GDP per capita wasn’t that much different than most of the most of the states, the United States and so forth. Enter, Enter Justin Trudeau and a basic he’s, he’s a very heavy handed socialist, and so over the last nine years, he has made the government significantly larger, incredibly overbearing in our economy, and he has increased taxes dramatically. And most importantly, just more recently, capital. You know, taxes on capital, capital gains taxation, which is the most foolish tax you could possibly do when you when you need capital invest in your economy, to drive the economy. And so that’s all come to a head over the last. You know, last year or so, people are looking at an economy where the GDP per capita has been dropping for the last five, six years, which is quite astounding. So even though we’re getting GDP growth of one or 2% if you’re growing population by two and 3% because of just massive immigration to your country, people are getting poorer. It’s also an economy that’s become way too heavy on dependent on the real estate market. And so a lot of our economy, over double the percentage of our economy versus the US is just real estate, which means we’re just basically economy, just building homes and apartments and condos. And that’s not sustainable either. And so what’s happened is the price of houses have just skyrocketed. People can’t afford the home, so there’s a big, big backlash against the government, because people are feeling the pressure everywhere, and they’re also sensing that the government really doesn’t care. It’s not backing off and just aggressively continuing to, you know, put the pedal to the metal and keep up the same policies which have been so destructive. And so, yeah, and what’s happened is now there’s been, you know, within the Liberal Party in Canada, which, which is running the country, and but again, just to point out for some people there, we have a parliamentary system, and Trudeau has a minority government, so the Liberals are in a minority position, but they’ve, they’ve linked arms with the NDP party, or another party up here, which is even more left wing than the liberals. So basically, you’ve got this government hobbled together, but there’s a real backlash in the people now. And so if you’re getting members of parliament, they’re also pushing back against the leaders and saying, Hey, enough is enough. And more recent. Lee, our finance minister, has had to step down our budget. The deficit on our latest annual numbers is 50% largely what they projected, and it’s basically just creating out of control the finances. So yeah, we’ve had a lot of people stepping down, top people in the government, a lot of pressure on Trudeau, and then you’ve had as Americans will know that Donald Trump has suggested he’s going to put tariffs on Canada, 25% on all the goods. Well, Canada, 40% of our GDP is exports. So we have a very, very open economy in the United States. It’s only about 10% so if we have such an open economy, and most of that goes to the states, and we have a 25% tariff, that would be absolutely devastating to the Canadian economy. So this is pressure that, again, has been put on Ottawa, and they’re sort of screwing around, wondering what to do with it, as you know, James, I mean, Trump has made it pretty clear that what He’s tying that tariff to is cleaning up our borders, tightening up our borders and stopping the drugs coming into our country, which I think is two great things that we should be doing as a country. So I’m very thankful that Trump’s actually put that pressure on Canada. We need to have strong borders, and we need to get the drugs out of our country, but so our government is just really been caught flat footed, and I think we’re seeing the change. And I suspect now Trudeau probably doesn’t have much time to live as a prime minister. I think, you know, I suspect he’ll step down sometime soon. If not, he’ll get eviscerated in the next election, which has to come by September, October, and he’s never been lower in the polls. So that’s what’s sort of going on in Canada. Is a bit, you know, a little bit of a dramatic activity. But having said all of that, what’s happening amongst the Canadian population is they’re sick and tired of the socialism. They do want a fresh government, and we have, I think, a good alternative in the Conservative government, with Pierre polio, and if he were to get elected, we would be open for business again. I think our Canadian dollar would jump very quickly back towards 80 cents, where, you know, from 70 where it is now. We would be able to open up and sell a lot more oil and energy around the world, and we would drop regulations, and we would have a much stronger economy. There’s going to be some pain, but I think we would be in much better position. I think Canada would be investable again, and I think that would be a wonderful thing. So that’s why I’m bit more optimistic on Canada as we hit the bottom here right now, and everything looks really bad. I think 2025 could be a fantastic year for Canada as the year progresses, and that’s because we’ve had enough, and we’ve got some good leadership and some good ideas in the wings that could take over and make some big differences here in Canada. So I think US investors should keep an eye in Canada and and look, look up here for some great opportunities, especially when you can buy assets at 70 cents on the dollar in the US. So not a bad deal. So
James Connor 27:56
I want to provide a little more context for our American friends. You may mention of the fact that Canada’s GDP per capita has been declining for many years now. And the GDP per capita in the US is around 76,000 this is all in us, dollars, 76,000 per person in Canada. I think the numbers around 56,000 and and then the other thing that’s happening to our labor productivity has been in decline for many, many years. You touched on the debt levels, and that labor
Jonathan Wellum 28:28
and that labor productivity is because we don’t have enough money going into capital investments. And that’s where in the States, they’ve been able to the money flows there. It goes into capital. It drives productivity. In Canada, you know, the money’s been leaving and and that’s because our government’s been scaring it out of the resource sector. I mean, we’ve, we could have had hundreds of billions of dollars invested, but our government has said, hey, you know, that’s not green, and that’s not something we want to push. And
James Connor 28:53
in terms of that, which just spiraling out of control here, they just released this. What do they call it? A fall budget? Fall budget, yes. So it was 60 we have a deficit of 62 billion. That’s up from 40,000,000,006 or eight months ago. So, yeah,
Jonathan Wellum 29:10
yeah. Well, I think what you know, they when they projected the 40 billion, they really made it clear that there’s such tight controls on these finances, it will not go above 40 billion. And you know, they blew through those numbers. So I think you know, in terms of credibility, you’re just, it’s right out the door. I mean, you no longer, they no longer have any credibility. Yeah. And
James Connor 29:28
you also made mention of the fact that we have two new taxes this year that have been imposed by the Liberals slash NDP government, and we have a new capital gains tax, and then this carbon tax that’s been around for I don’t know, year or so. I still don’t understand how they can rectify how a higher or the imposing a carbon tax will lead to lower carbon or lower emissions.
Jonathan Wellum 29:54
Yeah, and of course, it doesn’t. And the thing is, he’s put the carbon tax. Basically the carbon tax goes on all around. Energy. So whenever you’re, you know, go to the gas station, you’re paying more money at the pump every every time you go and but you see, he’s got more carbon taxes coming this year, and he’s not backed off at all, despite the weak economy, despite people saying, Hey, we cannot take this anymore. Taxation is is at a maximum level. He just keeps doubling down. There’s just no sensitivity to the Canadian population and the and the angst and the concerns and the the financial pressure that Canadians are under. And I think that’s, again, what’s just caused people just to have enough of this, and why there’s such a backlash against against the Trudeau Government
James Connor 30:34
and the other idiotic move the Liberal government has made is that they’re giving $250 rebates to over 18 million Canadians. That’s going to cost the taxpayers $4.6 billion at a time when we can’t afford giving away an additional 4.6 billion. Yeah,
Jonathan Wellum 30:51
and it’s interesting, the government has with with many of the taxes, it’ll tax you, and then it says, well, we’ll give it back to you in checks. And I mean, anybody who just, you know, anyone who takes like, three seconds to think about the stupidity of that now, who sets up a whole bureaucracy to tax you and then another bureaucracy to send you checks back in the mail, which basically offset, supposedly, the tax that they took from you. They go like, why are they doing this? Well, they’re expanding the bureaucracy, and they’re increasing the fixed costs of the state more and more. So we’ve had an 85% increase in government spending at the federal level and federal costs over the last five, six years. Well, again, as we’ve talked about in previous shows, and as most people know, the private sector cannot operate in an environment like that productively and when the public sector is almost as large as the private sector, when you add up, you know, the all three levels of government, federal, you know, state and municipal, then they’re just taking too many resources, and they’re and the private sector cannot, can no longer fund the public sector, and that’s when the wealth just starts to go down. We see this in, you know, extreme stream measures, of course. And we saw in Argentina. See in Venezuela, you see it in, you know, many countries around the world, and that’s why we need to push back. That’s why I think the dosh, you know, the Department of government efficiency, with Elon Musk and Vivek. Again, these are, these are things that are really, really needed, and we have to take these seriously as countries, not just the US, Canada, Europe and so forth. Governments have gotten bigger and bigger and bigger to the point where they’re just killing the private sector. But that’s where the wealth is created, the private sector. And if the private sector is not dynamic, you’re not producing and again, it goes back to the comment I made before. We should all be about what are we going to produce? How can we produce more? How can we produce more efficiently, lower costs? That’s how you deal with inflation, and that’s how you produce wealth over time, for for everybody and not just a few people. Trump
James Connor 32:47
also did a post recently about privatizing the Postal Service, the US Postal Service. And I thought, Man, what a great idea. We should be doing that here,
Jonathan Wellum 32:57
absolutely, after we’ve had our postal service cut off now on strike for a number of weeks. And I mean, people are now just alternate going and creating alternatives anyway, absolutely privatized. And what’s happened again with government is the Postal Service just keeps getting larger, but the volume of transactions goes down. So what do they do? They just put the price of postage up, and your unit costs go up. What should be happening is, as we know, if you’re a private enterprise, is you slash the bureaucracy, and you cut back the size of these of the organization to be able to deal effectively with the volume that you have, and then you try to build more volume through credibility and offering services completely different with the post office that’s controlled by the state. And so privatizing would be brilliant, and that would be a great idea in Canada. Also, I agree 100% there.
James Connor 33:45
So we’ve already talked about how the US is the US economy is doing so well, and how the markets are doing so well there, and we have a few problems in Canada. But how are you allocating your clients money between the US and Canada? Yeah,
Jonathan Wellum 34:01
we, we don’t, we don’t necessarily think about US Canada allocation as much as businesses and sectors where we’re going to invest. Having said that, we do have some great companies in Canada. So we look at the energy needs going forward, especially because of AI and the data centers and all of that, and we say, hey, nuclear is an area that we want to have some exposure to. So we’ll look at a company like Cameco, which is a leader in uranium and just incredibly well run company in Saskatchewan, based in Saskatchewan. And so we’ll take a position a company like that, and that’s a Canadian based company. So we’ll look at the companies in Canada based upon the sectors and industries, and then try to buy some of the best ones. And we have some amazing companies in Canada. I mean, they’re great companies and but it depends on the sector that you’re looking at. So we look at, we have a number of the Brookfield assets too. I mean, they’re based, I mean, they’re based all around the world. They’re global businesses. But, I mean, technically, they’ve got some operations and head office in in Canada. And so we’ll invest in those companies. So largely, we’re looking at the business, the industry, the sector, and if we can find them located in Canada, then absolutely, you know the insurance business, insurance brokerage, we own trishura, which was a spin out of the Brookfield companies, and we think that’s a great company, largely Canadian, but expanding rapidly in the United States. And so that’s the way we look at it, not as much driven by how much assets in Canada are not it’s really driven by the business, the business opportunity. And most of our Canadian businesses that we own are Canadian based businesses are very, very good operators in the US and that’s just because the US market is just so deep and large compared to the Canadian market that if you really are going to be a significant player, you’ve got to be, you know, down in the United States and and in some cases, of course, around the world.
James Connor 35:47
So you’re bullish on energy, you’re bullish on uranium. What other sectors? What about precious metals?
Jonathan Wellum 35:53
Yeah, we continue, we continue to think that, you know, the gold trade is a good one, and that’s and that’s largely because of mistrust in institutions de dollarization, which is, you know, it’s a slow trend. But again, a lot of countries don’t want to be as dependent on the dollar, regardless of what Donald Trump is trying to do and trying to pick on the bricks there a little while ago and threatening them, I don’t think that’s going to have a big impact on their desire to continue to be able to operate, you know, outside of outside of dollars and so. And I think again, just the the financial conditions of our governments, the deficits and the debt, I think you know, we would, we will be looking at Gold probably pressing, pressing over 3000 in the next 12 months or so. Central banks continue to buy it, and so, yeah, we like it for all of those reasons, and for hedge and as I’ve talked about before, we typically are buying a lot of the royalty companies, and some of them are reasonably priced. And of course, the mining companies, as you’ve talked to other other guests, and so forth, think most people the market know they really haven’t. There’s been a few that have responded, and ego, ego has done very well and so forth, but a lot of the mining companies still have really trailed the large increase in gold this year, 20, you know, 20, almost 28% silver up over 20% and so there’s probably some good upside in that sector too, for people to be looking at, and be picking up some really well run businesses. And that’s what, that’s basically what we’re attempting to do in that sector also. Yes, yes. In
James Connor 37:23
spite of gold being up 30% on the year, give or take, a lot of these gold producers, the performance is very mixed. If you look at the world’s largest gold miner, Newmont, I think it’s flat on the year. The numbers have just been horrific this year, and Barrick is the same way. I think barrick’s down on the year. So you got to be very careful how you pick your the names in the mining sector. Yeah, our
Jonathan Wellum 37:47
largest position, so, you know, we’ve had been wheat and precious metals and Cisco royalties, Agnico, Eagle, fortunately. So fortunately, our companies have done quite well, and we have not been in some of those other large names. I mean, mining is, as you know, is a very, very difficult business. It’s not an easy business. And even just, even though your commodity prices are going up, sometimes a lot of your other costs are going up, or this political risk, as we saw, and, you know, we’ve owned Franco Nevada for many years, and they got, they got tagged, you know, late last year, you know, with the Panama situation, with their own big asset in Panama, the Cobra mine, and that was shut for a little while. We do think, if investors do want some optionality there, there’s an idea, I think that Franco is a great company. It’s, you know, it’s reasonably priced, it’s not cheap, but that project could come back on in the next 12 to 18 months. That COBRA COBRA mine, it’s pretty hard for Panama not to restart that. It’s a it’s a massive impact on their economy, and there’s increasing pressure on them. And if that were to happen, that nice optionality on a little bump on maybe a, maybe a 15 to 25% bump on Franco. So there’s, there’s some ideas that people could look at too. Yeah.
James Connor 38:53
And one other thing we should talk about you touched on this earlier, but is the US dollar and the strength of US dollar, and our Canadian dollar is down 8% this year against the USD. What are your thoughts, and is the US dollar going to keep climbing? And as a Canadian, what are we going to do? Well,
Jonathan Wellum 39:13
as I said just a little while ago, I think our Canadian dollar, you know, it’s going to be under pressure as long as we’ve got the uncertainty in our government, but that that’s going to, I think, clear itself up as we get into 2025 and the market should be looking forward and saying, what really would our dollar be worth if we had a competent, insane government in power? I mean, the government we have now is by far the worst government we’ve ever had in our country, and there’s virtually bereft of leadership and economic understanding. And so if you were to change that and put real leadership in there with the kind of assets that we have in this country, and also some some good premiers. I mean, we have some good premiers out in Saskatchewan, Alberta, defending those, those regions of our country. We’re a rich, rich country. And so I think. Think that we could be seeing the bottom on our Canadian dollar in the next little while, and our dollar could easily bounce back up, especially if there’s a bit of a return to commodity the commodity prices go up. And commodities didn’t do that well last year, other than gold and silver and so forth. So I’m more bullish on the Canadian situation looking into the year, because I think there’s definitely going to be a change. The polls are indicating there’s just no way that the current folks are going to stay in power in terms of the US dollar. Yeah, I think Trump’s good. This is going to be a challenge for Trump, that the US dollar is probably going to stay strong and and that’s just because you can’t, you know, he’s going to have all that sucking sounds. Going to be capital coming back to the US, and it’s going to come to the US, because it’s going to be a great place to invest. And so it’s going to be interesting to see how they respond. He’s got some pretty sharp people, obviously, working with them in the areas of finance. He’s got some really sharp people. And I think that will be a challenge for the US, the dollar, when you compare it to the euro or the pound or the, you know, the Chinese want. I mean, my goodness, what would you rather own? And so that’s going to be a challenge for the current account deficits. And I think that’s why, you know, Trump’s looking at the tariffs and things like that. So that will be one to watch. I’m not sure exactly how that will all pan out, but, you know, the US dollar, there’s no, there’s no question, when you compare it to the other currencies around the world, and the policy this, policies that Trump is bringing in, is going to be biased on the upside.
James Connor 41:26
Well, Jonathan, like you, I am very hopeful for 2025 and I’m looking forward to it and everything that it’s going to bring. And that was a great discussion. I want to thank you very much for spending time with us today. If somebody would like to learn more about you and about your firm, rock link. Where should they go? Yeah, probably
Jonathan Wellum 41:42
one of the best places, just our website, which is rock link.com, rock link is spelled within C at the end of Link, just to have a little bit of fun there. So, R, O, C, K, L, I, N, c.com, and you can email us at info@rocklink.com, and that’s, that’s the best way just reach out our website and just contact information we’ll respond to immediately. Respond to immediately. We love talking to the investors. We work hard for all our investors. Put together financial packages for them, especially the clients at wealthion, and we will do an assessment free of charge. Talk to you. You can come in, if you like, and you’ll learn what we’re doing, and we’ll spend the time with you. And just absolutely reach out, talk to us and and we’ll have you come on in and and speak with you. We operate across the country so we can deal with anybody from any of the provinces, and we’ve got clients in all the provinces at this point, once
James Connor 42:35
again, Jonathan, thank you. Thank you very much. Well, I hope you enjoyed that discussion with Jonathan Willem as a reminder. Rock link is a wealthy on endorsed financial advisor for Canadian investors. And if you need help preparing for your financial future, consider having a discussion with Jonathan or another member of his team. You can find out more information@wealthion.com slash free. Once again, wealthion.com/free and if you like this content, please subscribe, like and share, and if you want to check out more content like this, you can watch this video now once again.
