Markets may be hitting new highs, but Jonathan Wellum, CEO of Rocklink Investment Partners, warns that valuations are stretched and investors need to be selective. In this interview with James Connor, he explains where he’s still finding value, how Trump’s tariffs and trade policies are reshaping the global economy, and why Canada risks falling further behind the United States.
Key insights from this conversation:
- Why U.S. markets remain resilient despite rising tariffs and slowing consumers
- How Trump’s lower taxes, deregulation & reshoring policies are strengthening America
- Why meme stock speculation is a trap for retail investors
- Where Jonathan sees real opportunity
- His candid take on the Federal Reserve and why it distorts the free market
- The structural problems holding back Canada’s economy compared to U.S. growth
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Jonathan Wellum 0:00
The valuation of the market is on at the high end. No, I mean, there’s no question about that. Those, those are just objective numbers. 2526 times, those are high numbers, and so I think people have to be very careful.
James Connor 0:16
Jonathan, thank you very much for joining us today. How are things in Toronto?
Jonathan Wellum 0:19
Yeah, good to speak with you again, Jimmy, things are going quite nicely in Toronto. Certainly, the weather’s sunny, bright and warm, which is a nice condition to have in Toronto, and the markets are doing well as they are basically right around the world. So things are things are good,
James Connor 0:35
things are looking up. So we are in the middle of q2 earnings season. And I love this time of year, because it gives you a good sense of what’s happening with companies, especially after we saw such a weak q1 but it’s still early, but a lot of the numbers we’ve seen so far are looking pretty good. JP, Morgan, Bank of America, Netflix, all came out with good numbers. We just saw numbers out of Tesla. They were weaker than expected, but according to facts that analysts are looking for a 5% earnings growth in the second quarter of this year, and that number has risen to 5.6% just on the back of these stronger numbers that we’ve seen here in the last week or two weeks, 83% of the companies in the S P that have reported have beaten expectations. S and P is up five to 10% on the year, depending on what day of the week you’re you’re looking at. But what’s your take on the markets here? And are you buying stocks? Are you selling stocks? Do you have any concerns about valuations?
Jonathan Wellum 1:30
Yeah, it’s, it’s quite the market, isn’t it? I mean, there’s no question that overall, overall, the valuation of the market is on at the high end. No. I mean, there’s no question about that, those, those are just objective numbers. 2526 times, those are high numbers. And so I think people have to be very careful. We’ve been very careful throughout the year. We are invested heavily in the market. I mean, doesn’t mean we’re in the sidelines. We do have some cash, cash reserves, but we are being very selective and careful with the businesses that we buy, because we’re value investors, at least, we try to be value investors as best as possible. Here, you know, our top holdings, our top 2020, holdings or so is where the majority of our investments are. And those, those top 20, we like the valuations. You know, more or less, I think they’re trading at some pretty attractive valuations, and we are constantly rotating slowly into stocks that we think are overlooked and underappreciated, so that we can pick off good opportunities, so that we’re trying to keep the valuation of our overall portfolios more attractively, even as the market goes up. But earnings, as you say, are slowly being increased in terms of estimates, is surprising. The market a bit, our revenues are actually up. And part of that, I think, is the big multinationals, the US dollar has been weaker. So if they’re collecting international revenues, it is a benefit, just like it was a bit of a drag over the last little while, with the US dollar up now, that’s reversed, that’s positive, and earnings, they’re growing. But there’s been a few disappointments, but those are generally in certain industries like consumer discretionary and areas where you’re relying on a strong consumer and the consumer is not as strong, those businesses have felt it a bit more. And certainly, technology continues to surprise. I mean, the numbers are quite amazing, and quite a few of the tech companies, Google, last night, you know, blew out the numbers and the estimates and so on. So that’s, that’s where we’re at. So careful, careful, careful. Know what you’re buying. But you know, this thing can reverse. It will at some point. And I think the last thing I would just say that we can follow up on is that all of the threat of the, you know, the Trump tariffs and so forth, hasn’t really impacted businesses that much, certainly, you know, some businesses, but overall the market, it hasn’t hurt the market that much. And there’s been a lot of a lot of ink spilt and a lot of air, air blown about the Trump situation. But at the end of the day, I think what he’s doing is ultimately strengthening the US economy with lower taxes and lower regulations and more capital coming into the country, and that’s certainly a positive, yes,
James Connor 4:04
and I’m glad you brought that point up, because in q1 there was a lot of uncertainty associated with the trade wars and the tariffs, and nobody really knew what was going on and what the impact would be on four companies. But now it almost seems like there’s a sense of normalization coming back to the marketplace.
Jonathan Wellum 4:21
Yeah, it appears and again again, because Trump is a little bombastic. I appreciate many of his policies, but the way he goes about it, yeah, it wouldn’t necessarily be the way that I would prefer that he went about it, but that’s Trump. It appears that what’s what’s really happening is he’s going to be settling on 10 to 15% type tariffs if you want to sell into the United States. And he made this clear for the last 10 years. And it’s not this isn’t new that he thinks you should pay a tax, if you will, or a tariff to get into the US market. It’s the largest market in the world. It’s the most dynamic. If you want to sell to Americans, you’re going to pay for it. And so he’s made that pretty clear. It appears now with the Japan deal, the UK deal, the European, you know, talking about the European deal. Now it appears that sort of 10 to 15% is what he wants to collect. If you think about that, you know, if you have a $30 trillion economy, I’m rounding numbers up a little bit, say $30 trillion US economy, and 10% say 3 trillion is, you know, there whether exports of their economy, exports, imports, you know, the open part of their economy, and you can pick up 5010, 15% that’s 300,000,000,350 $400 billion a year in tariffs. That’s a nice revenue stream. And that’s what they’re predicting. That’s what’s got this suggesting that they’re picking up 30, $35 billion a month. That’s not factored into most of the numbers, and the CBO numbers and so on. So that’s not a bad little take. And as you know, I think, as Trump is proving, what’s more important than that even is that if you want to sell in the United States, you’re going to invest in the United States. And so companies are now moving their investments into the United States and out of China and out of some of the other countries. And so I think the big competitive advantage there will be a lower cost of capital in the United States, incentives, less regulations and avoiding tariffs. And I think he is getting largely what he wants, despite all the ups and downs and all of the, you know, the bombastic behavior and all of that that comes along with Donald Trump, he is benefiting the US, I think in a major way. They still have a lot of problems, though, and I think the big issue for him is, how do you grow the economy? How do we expand this economy so that our tax revenue can go up with less tax rates and lowering tax especially on the working class, which is what he’s really focused on in cutting, you know, tax on tips and tax on Social Security. Those are big issues. Those are really favorable for the average person in the United States.
James Connor 6:50
There’s so much happening in the world right now, especially when it comes to geopolitics. And if you need help understanding how these events will impact your financial future, consider having a discussion with a professional financial advisor. You can find out more information@wealthion.com slash free. Once again, that’s wealthion.com/free now back to the show. Okay, so you mentioned you’re a value investor. Maybe you can just tell us where you’re seeing value in this market. The S, P is trading around 23 or 24 times earnings, which is at the high end of the from a historical point of view, that’s at the high end. But where do you see value in this market? What sectors are you looking at? And just for the benefit of our viewers, you invest both in Canadian stocks and also US equities.
Jonathan Wellum 7:37
Yeah, we will invest around the world, but the predominant emphasis would be US based companies, largely, and then some Canada second, and then we’ll pick up companies that would be, say Europe or maybe Japan. But even the European or Japanese companies we would buy would be large global players. So for example, we do own Snyder electric, which is helping, you know, data build data centers and also facilitate the build up of the grid. You know, as we as electrification becomes more important, and energy demand to go up and so on. And that’s a European based company, but it’s a global business. There are substantial positions in the United States. So we’re generally looking for global businesses. Even our Canadian companies would be companies that are largely dealing with North America, at least, and if not global. So where are we finding value? It’s really business by business. So we’ve got a couple insurance companies that we own, Markel insurance, which is a specialty insurance company United States. They’ve, I wouldn’t say, fall on hard times, but they had a couple underwriting challenges, and that took the valuation of the stock down to, you know, one and a half times book value, which is cheap for Markel. It’s a really good it’s a really good producer and insurance underwriter. And they also own businesses are like a little bit of a mini buffet. And so we’ve, we’ve invested in that back at, you know, 1500 now it’s over $2,000 it continues to do well, if interest rates do come off a little bit. Of course, they’ve got large bond portfolios in the insurance in their insurance portfolios. So that area, we own quite a bit of tri Shura, which is, again, a brokerage firm spun out of Brookfield, based in Toronto, but very much a North American firm. And they continue to grow at high double digits. It’s a well run company. And we that, again, we was very cheap. Just a little while goes down to 33 bucks, and now it’s up around 44 but it’s still, we think it’s worth over 50 and so it’s so the name by name in finance companies, you know, we own Burford capital, and so, which is, again, litigation finance, and they had some challenges recently in the big, beautiful bill of Trump, they were going to target litigation finance companies actually tax them higher rates, so they had a little bit of a drop there, but that was dropped out of the bill, and now they’re taxing the same as every other organization, and that company trading a little over book value inexpensive, and they’ve got a potential big win with YPF. Out of Argentina, where they have a ruling against the Argentinian government, for over $16 billion they could pick up 40% of that, which is over over one and a half times their market cap. So I you know place like that. We’ve been in the royalty companies, in the gold, silver royalty companies. Again, we continue to like the precious metals because of the financial situation. And we’ve gone down in size in some of the royalty companies, which are trading closer to one and a half nav instead of two, two and a half, like Franco or Wheaton. Although we still own Franco and wheaton sandstorm, we’ve owned a lot of sandstorm. They just did a deal recently with Royal Gold. We think that combination is going to be a good combination. The markets not appreciating it, in our view. So there’s some opportunities. So we’re we’re looking around the market at different areas, Autodesk, in the technology space. We like that, that business. So it really is by sector, by sector, will look for individual businesses. I think that’s what investors should be doing, especially for us, who are active managers and not just index investors. We’ve got to find the businesses that may be overlooked, under underappreciated, you know, maybe, you know, aren’t, aren’t fully valued and and look for good ideas. That’s, that’s what we’re doing in the marketplace. But it’s a lot of hard work. I’ve got a number of guys. We’re just running screens and looking at businesses and calling companies and talking to, you know, the businesses and running models and seeing what we can find.
James Connor 11:24
So it’s more of a bottoms up approach as opposed to a top down approach.
Jonathan Wellum 11:30
It is, having said that it’s much easier to buy a business where there’s a rising tide. And so, you know, we do look at technology and it is rising tide. And I know people are excited about AI and data centers and so forth, but there is a lot of growth in that space. So we are trying to find businesses that, you know, the picks and shovels, the basic infrastructure, companies that can profit from that. So we do own some of the Brookfield companies. Also Brookfield infrastructure. They’re building out a lot in the data centers, also and, and, and so again, you’re trying to find it is better to find areas where there’s secular growth and where there’s opportunities, rather than you getting stuck in a value trap. And you can buy sometimes companies that are cheap, but they might stay cheap forever. And so we’re trying to find companies that are inexpensive, not necessarily dirt cheap, but inexpensive, but they’re also in areas where, you know, if there’s excitement, there’s dynamism, there’s going to be interest in the marketplace, they could get picked up into indexes if they’re not already in the indexes and things like that. So we are looking for secular growth behind the businesses. It’s just, that’s just, I mean, you’ve been in the market a long time, and, you know, you can find value companies and they do nothing for the next 10 years, and they stay cheap and cheap and cheap. And so we are looking for companies where, you know, investors are going to come in and want to own
James Connor 12:48
them. So a name like Nvidia, which is the first company to reach $4 trillion in market cap, just staggering numbers, but it’s up 25% on the year. It’s up 80% from the April lows. Would you ever get involved in a name like Nvidia
Jonathan Wellum 13:03
at this point? At this point, it would be hard to step up and to buy it, you know, a $4 trillion valuation. And so, yeah, we did. We weren’t there on the way up and at this point to jump in. You know, the growth numbers that are expected in Nvidia now are very optimistic, and we just cannot justify going in. Should we have bought it a couple of years ago? If we had saw what was happening? Yeah, we wish, certainly wish we did. But we’ve owned other companies that, you know, we’ve owned other companies that have gone up 9090, 200% this year, year to date. You know, growing a gold royalty Corporation. We put a lot of money into that. That that was a smaller royalty company no one wanted to own, and it’s up 90% this year, and we had a pretty decent position for clients in that and stuff like that. So you can find other opportunities, but sometimes you do miss and one of the things I’ve learned in the investment business is don’t let FOMO drive you. Fear Of Missing Out. And you always have to realize you don’t have to make the money the same way your neighbor made it. You can make it in other areas. And so if you’ve missed something, and you legitimately go, you know, at 4 trillion, what’s going to take for this to become 8 trillion? I mean, you have a 90,000,000,000,090 90, $200 trillion total GDP on the globe. I mean, can a company become an 8 trillion at this point? Yeah, it could. But is that speculatively high? You know, has to be. It just, it’s just too large. And so we’re going to be, we’re going to be careful, and we wish investors in the video Well, and we’ll try to make money somewhere else.
James Connor 14:36
And what about a name like apple? It’s one of the few names down on the yards down 15% give or take. Would you ever get involved in apple at these levels?
Jonathan Wellum 14:45
We do have some apple on the book. We did took some money off of Apple earlier this year, because, again, it hasn’t been growing, it hasn’t been expanding, but we still like to franchise or some there’s some opportunities that they could, you know, buy into. They’ve got a lot of cash. They have a balance sheet that’s probably a higher credit rating in the US government, except they can’t print money and and so we still own some apple, and we’re actually looking at that and looking at their options and seeing whether, you know, we should actually add a little bit more to it. So that’s one that we’re just doing some work, and they continue to do a lot of work on Amazon. We’ve owned Amazon, again, that’s one of the big guys, too. But again, we just see that they’ve got a lot of avenues for growth still in that business. It’s really fascinating company. It’s much more obviously than a retailer and even AWS. They’re going much beyond that also. So we do poke around and do have investments in, you know, some of the, some of the companies that are a little more higher, you know, market valuation, but they have to show the growth, and they have to be able to be justified on, you know, a cash flow basis, and, yeah, and then we go from there, look at the AI space is, is huge. We talk to companies. And this isn’t coming from, you know, market prognosticators. This is talking to businesses and companies that are putting capital side are the beneficiaries of a lot of the growth. And, you know, it’s a real change. It’s just, how do you value it? And just trying to be disciplined in the midst of this, this boom that’s taking place, and how can we find businesses that will benefit from it, that aren’t necessarily on the, you know, the on the bleeding edge of it also. So that’s, you know, software companies that can do well and things like that. So, yeah, that’s the way we approach it.
James Connor 16:27
Now, I know you don’t trade these speculative names or meme stocks, but I want to bring this up because you did express concern about the valuation of the market overall, and we had this heightened sense of speculation, of entering the market again. There’s a company called Open Door technologies. It just ripped. It went from 50 cents to five bucks here in a matter of days. And a number of other meme stocks like GameStop, Kohl’s also Krispy, Kreme donuts also ripped. Are you concerned about this level of speculation that we’re seeing that’s entering the market again, it’s
Jonathan Wellum 17:02
not, I mean, it’s not healthy. It’s a redistribution of wealth that takes place, rather than a creation of wealth. And that’s, I mean, we want the market to be a creation of wealth, where it’s slowly, you know, going up. I think Jimmy, this is one of the inevitabilities of the stock market. I don’t, you know, you know. And I’d rather just let people go at it if they want to, rather than get involved and start regulating it, just warn people that, you know, you have to be prepared to lose a lot of money. I mean, you could potentially make quite a bit of money, but of course, if you’re making money, someone the other side is losing it eventually, if the stock eventually goes back down to where it started, and no one’s made any no one net, net has made money. You’ve just been able to, you know, read, you know, redistribute it, as I said. So I Yeah, it’s not a good thing. It’s not healthy. I rather see the capital markets approached intelligently, rationally, long term. It’s good to have some short term players, because it does clean up the market. And I think that’s also healthy in a an active, a dynamic market, but a pure speculation, where people just run in and run the stock up, knowing full well that they’re trying to entice other people in, and can get other people in and write reports and then jump out. And that’s not a healthy situation, not one that we’d want to encourage. But on the other hand, I don’t want, you know, government jumping in there, and you know, the regulators, you know, let it run its course. It always does and and for for retail investors looking at that, be very careful, please, please, please. This is not really where you want to be. You want to be a disciplined, long term investor that’s proven to be the best way to make money and to approach the capital markets. We shouldn’t be gamblers in the market.
James Connor 18:38
So I want to move the discussion toward the economy and in the US economy, I can’t get over how resilient it’s been in the last five years. And we’ve seen so many economic shocks. You look at COVID in 2020 then we saw the interest rate shocks of 2022 and this year we’ve seen in 2025 it’s it’s been all about tariffs and the trade wars. And yet the economy continues to be very resilient and hanging in there. It’s still growing at two two and a half percent. The unemployment rate continues to hang around this 4% number. What are your thoughts on the economy? Are you concerned at all? And I also got to bring up this talk of recession. We’ve heard so much talk of recession here in the past year, but it does not look like it’s going to happen this year anyway.
Jonathan Wellum 19:22
Yeah. I mean, in hindsight, as you look back, you can sort of justify why they haven’t gone into a recession. But at the time, when you, if you go back a couple of years, and you look at the Fed increasing interest rates at the fastest rate, you know percentage change anyway, because we’re coming off with, you know, almost nothing, percentage change, the fastest and most rapid rise in history, recorded history, in terms of the Fed, you’d say, yes, you have to, have to have some recession, you have to have a slowdown. And you know, that just did not materialize. And I think that surprised everyone. Surprised us too. We would have thought, with that kind of rapid rise, what we didn’t, you know, in hind. Site, you realize they spent money like drunken sailors, so the budget deficit just skyrocketed, and they just pump money into the economy like there was no tomorrow, and they ran up their debt, you know, by multiple, multiple trillions, so they were able to get away from that and but, and of course, then you think, well, what’s the hangover effect here? What’s the hangover effect? Eventually you’ve got to settle. You know, they can’t get rid of the business cycle completely. And this is, this is ridiculous. And so I think, again, it’s caught people off guard at this point in time. What’s surprising most people, and I think what’s bolstering the US economy, of course, they’re continuing to spend money. I mean, they’re still running a 6% deficit to GDP, which is incredibly high, and they’ve got to get that down very soon. But I think what’s, what’s what’s trying to what’s helping them to avoid the recession at this point are the Donald Trump policies. I mean, there’s a lot of capital going into the states, and taxes are coming, coming down, regulations and so on, and that’s been encouraging different sectors in the economy and in the marketplace enough to hold them, hold off from going into recession. I think that’s the biggest issue right now. Can that continue? You know, again, I from our perspective, we want to be careful. We’re not trying to be stock market procators And on the macro level, but we’re looking at companies. But inevitably, there has to be some type of recession at some point when that happens, of course, we don’t know, but I think they appear to be avoiding that bullet now for for the remainder this year, and if interest rates do come down, as we know this, the big fight between the Fed, fed Jeremy, Jeremy Powell and Trump, This big fight is not going to go away until Powell is out of there, and, and there is pressure on the Fed to drop rates, and so that would also help in the case of the state. So hey, the long and short of it is, it’s unbelievable how long this has gone on, and I think it’s surprised almost everybody. Certainly I put myself in that camp and and we will. We want to be careful, because at some point there will be some slowdown. But the Trump policies, I think, are helping just elongate this thing much further. And they’re good economic policies. This does not make any mistake about it. The US as they’re implementing these policies is going to become, continue to be, the leading dynamic economy that you know, the deepest economy, liquid economy, the most you know dynamic in terms of ideas, facilitating capital for venture capital, businesses, private equity, all of that. And that is huge. And other economies in the world aren’t, you know, can’t, you know, there’s no way they can compete with the US when it comes to that. And Trump’s just, I think, expanding that distance even more.
James Connor 22:37
So you touched on the Fed. We have a Fed meeting coming up next week. And, you know, of course, there’s speculation whether or not they’re going to cut rates. What are your thoughts? Do they cut rates next week?
Jonathan Wellum 22:52
Oh, boy, I hate to be be guessing what the Fed is going to do. You know, there’s a lot of pressure on them. We just had the EU hold rates today, and the Bank of Canada is holding rates. Of course, they’re 100 225, basis points lower, right? So I don’t know. I think it’s probably a 5050, chance that they could cut the rates. It appears, going into the fall, most of the people who follow the Fed, much more closely than I do, are suggesting that they’ll probably cut 25 to 50. We’ll have to see. I mean, the two year right now, which generally is a pretty good Gage, isn’t too far off where the Fed rate is. It’s a little bit below, so they probably have room to do a little bit of cutting. We’ll see if Trump’s berating of the of the Fed Governor works. I think he I think the rate should be a little lower in the US, Visa V just because you look at the other other countries around the world, the cost of capital, the cost of money, is a lot lower. And I think Powell has kept it higher for reasons that he, you know, he’s talking about tariffs and so forth, but that really hasn’t materialized. And so at some point he’s got to realize that he’s he’s mistaken, and he should drop the rates probably, you know, 25 to 50 basis points, and then then let them sit there and see what happens after
James Connor 24:04
that. Yes. And to your point, one of the reasons why the President wants to get rates down is because of the cost of interest associated with the debt. $37 trillion in debt. It’s costing a trillion dollars a year in interest. Imagine having that credit card bill coming. But I read recently that every 1% increase in interest rates results in interest payments going up by an additional $300 billion okay, so it can easily go from 1 trillion to 1.3 trillion in a short period of time. But there’s also a lot of speculation that Powell is going to be replaced, or he’s going to be fired. His term is up in May of 2026 if he were fired tomorrow or next week or next month, do you think that would have a negative impact on global markets?
Jonathan Wellum 24:50
Temporary, temporary. I I’m in the camp that. Look, I’m not a fan of any central banks, to be honest with you. I think I’d rather have the free market, which is what should determine the price? Of money and not a bunch of PhD sitting in the Echols building, or their new building, whatever they call it now, if they call it the same thing, but, and it’s got this end, I love the way he’s questioning the Fed and questioning how many PhDs they have in there. I mean, how many PhDs they got sitting around? I mean, give me a break. You don’t need that that many people just running all the silly little algorithms to justify that somehow they got this black box, and they’re magicians, and they know something that you don’t know. This is ridiculous. And so the Federal Reserve is has been overhyped. I think it’s a dangerous institution, personally, and they’ve proven that since 1913 basically the loss in purchasing power, and the devastating impact of the Federal Reserve has been been massive. And so they’ve elongated bubbles. They’ve caused greater problems in the marketplace. And so, yeah, everyone you hear all these people blowing off steam, oh, there’s, you know, it’s going to be political if Trump gets rid of Powell and so forth, it’s already political. I mean, the Federal Reserve is very left leaning and very much supporting of the Democratic Party, in my view, anyway, and they don’t like Trump, and you can see that it is political already, that is for sure. So I’d say, Yeah, you get a knee jerk reaction, and then the market will wake up and and realize that really nothing has changed other than the if the Fed, the Fed guy, has changed, and they’ll look at the policy going forward.
James Connor 26:21
So one of the things that’s come out here in the last few days is the renovations going on at the Fed. They’re spending $2.5 billion on renovations like, I’d love to see those renovations like, what are they doing?
Jonathan Wellum 26:35
Well, so at this point, these institutions get larger and larger and larger. The bureaucracies can only go one way. It’s a ratchet effect, and they can never turn the ratchet the other direction. I loved what Buffett and Munger said many, many years ago, I was at one of the annual meetings. They talked about the high priests of finance. And you have all these people. They run around. You have them in the in the universities, teaching finance, also trying to make everything so complicated and more complicated than it really is, so that they have power over you, and that’s exactly what the Federal Reserve is. And so that’s my view on it. I think that a handful of people know full well what the market you know where the interest rates should be. You don’t need all these PhDs running around telling us that. And more importantly, it should be determined by the free market. Let millions and millions of participants tell us where interest rates should be, not the Federal Reserve.
James Connor 27:23
Yes, I’ve read recently, there’s four to 500 PhDs working at the Fed.
Jonathan Wellum 27:29
Yeah. Can you imagine? It’s crazy, yeah. And what they, could they possibly do after you’ve had after 25 say, I mean, that’s a very generous number, what incrementally is the 26th 27th 28th 100th 200/400 person doing. I mean, it’s just ludicrous, is what it is, and that’s a complete waste of money, and that’s why, again, we’re in such a serious situation. Was hopefully. I was hopeful that Elon Musk and Doge would be able to cut back more and and even Scott dissent asking like, what’s the use usefulness of the Fed? That is a good question. They should ask that question. We should need to ask that questions about all of our bureaucracies in government.
James Connor 28:10
So you and I both reside in Toronto, and I want to have a discussion now in the Canadian economy. I think we both agree things are looking pretty good in the US in terms of the economy and also the financial markets not so good in Canada. And before we talk about the economy here, I want to get your opinion on our new prime minister, Mark Carney. He was elected in March, so he’s only been in there a few months. But what’s your take? My sense is there’s a lot more professionalism associated with Prime Minister’s Office compared to Justin Trudeau. What’s your take?
Jonathan Wellum 28:41
Yeah, I mean, he’s got less colorful socks and a more a better tailored suit, and so I think the appearance is definitely a more professional. There’s no question about that. It doesn’t, I don’t think, I don’t think it took that much to improve on the professionalism of Justin Trudeau, unfortunately. I mean, he just was way outclassed and should never been a prime minister of this country, but, but my concern with Kearney is that he does still share all of the same ideology, and so it’s very difficult to wrestle someone away from their socialist left wing, green agenda, ideology, globalist, sort of European View. And now he is talking about working more with Daniel Smith, Scott Moe opening up, you know, some, some bigger projects. My concern with some of those projects, though, is what speed at which they’re coming. So they need to do that much faster, number one and number two, I would rather have the private sector really driving it, rather than again, the public sector out of Ottawa, and so he still wants to use a very top down approach. So those are concerns, but there’s a lot of pressure on him, because the Canadian economy, as you know, on a per capita basis, really has not grown over the last 10 years, very little growth over the last 10 years on a per capita basis, which is the only way you can you should look at it. And that’s assuming that inflation numbers are actually accurate too, which, again, is a whole other discussion. And so there’s a lot of pressure, because wealth levels have really come down in this country, vis a vis especially the United States, are trading our major trading partner, and so they realize they’ve got to dig more holes. We’ve got to extract more of our resources. Our manufacturing sector is under a lot of pressure. It’s very small relative to our population. We are a resource driven economy, and so for not developing our resources, we are going down in terms of our wealth level. So that pressure is on. Kearney and the province is finally under the leadership of Danielle Smith, largely and Scott Moe even Doug Ford, who you know, was a liberal, really, in in closet, liberal, maybe not even a closet. Maybe he’s open liberal, but even he’s talking about developing and and so that’s good. So these are good developments, and less interprovincial barriers and so forth. So there’s some positives, but I think it’s because they’re being dragged into, at least from Carney’s perspective, not necessarily because he believes it, but either way, there are some there are some positives, and I just wish it could be much more positive and driven by someone who really understood the importance of developing our resources and bringing capital back into this country and lowering taxes regulation so on, one of the biggest benefits we’ve had is getting rid of the carbon tax, and so that’s been very helpful in getting inflation down, also just putting more money back into people’s pockets, but that was driven completely by the conservative agenda and Pierre polio putting the pressure on the liberals. They did that reluctantly, so we’ll have to see.
James Connor 31:35
And I just want to provide a little more context for our viewers. The you mentioned, the GDP has been relatively flat in the last 10 years into the liberals and ballpark numbers 1.8 trillion in 2015 to 2.2 trillion. Now a lot of that growth is just inflation, so it’s not even real growth. If you look at it from a GDP per capita basis, it’s significantly lower. The unemployment rate in Canada is 7% in the province of Ontario, it’s 8% and if you look at youth unemployment, it’s like 14% so there’s some real problems here. And you touched on the importance of of the federal government, the provincial governments, getting together and doing more with manufacturing, but also resources. Do you think that’s possible?
Jonathan Wellum 32:24
Yeah, it’s a good question. I’m hopeful. I do think we will probably get a couple of big investments done only because of the pressure, but it’ll be slower than it should be, and there’ll be less projects than we need. That’s my concern. I think they will do something just so much pressure from Alberta. I think there’s pressure in terms of the breakup of the country. There’s pressure in terms of our budget stress. I mean, right now we’re looking at, as you know, probably around $100 billion deficit. It was supposed to be about 40, and just kept, keeps escalating, and then Mark Carney has agreed to the 2% GDP spend for our military. I mean, our military was like 1.3% was one of the worst in the G, G 7g, 10, whatever. I mean, it’s one of the worst in the world period. Incredibly naive spending in terms of having the large, some of the largest borders in the world, in terms of miles, miles and borders, and we can’t even protect our own country. It’s just absolutely outrageous. So now he’s going up to 2% but that’s got to come from somewhere. And then he’s, he’s promised up to 5% looking out, you know, sort of a decade or so, so a lot of pressure on our finances and and so, yeah, it’s going to be, it’s going to be tough in Canada. I mean, what we need to do is grow the economy if you want to have in basically a tax system should be like a royalty company. If you want to increase your royalties, you grow the base. It’s not that complicated. So how are you going to grow the economy? Bring in private capital. Start digging a lot of holes and get the copper, get the gold, get the oil, the uranium, the potash. I mean, we are loading cut the trees. We’ve got some of the lowest energy costs for aluminum production in the world, in Quebec and so on. I mean, this is not rocket science, but this is held up by tremendously bureaucratic, small minded, incompetent people who have are driven by, you know, really a green agenda, which is extreme. So these are, these are the things that we have to overcome in Canada, and we saw some of that in the United States. But of course, Trump has really reversed these in a dramatic way. And so that’s why I think the US is just so much better off at this point, and incrementally, the spread is going to grow and the gap is going to only get larger if our policies remain, you know, as they are,
James Connor 34:41
yes, and that’s my big concern, is because once you set your set on this path, it takes many quarters or many years until the path reverses itself and and the unemployment rate just keeps going up across the country and within the province of Ontario, even in the city of Toronto, it’s like approaching 10% so. Is a crazy number, but I’m just thinking like, if we do enter into this ongoing trade war with the US, and because it still hasn’t been resolved, so there’s still a lot of uncertainty there, and that’s also a problem. But I’m also thinking, Okay, if the Liberals take another year or two years before they implement these massive infrastructure projects, it’s going to be a long time before this economy shows any improvement
Jonathan Wellum 35:23
well. And if the if these infrastructure projects are driven by the government, there’ll be massive, massive overruns too. And so there’ll be waste of capital. We cannot afford to be squandering and wasting more capital. And so we’ve seen this before. You know the way a pipeline? The private sector is willing to do a pipeline at X number of dollars. The government says, No, you can’t do it. We’ll do it, and they’ll do it at three or 4x I mean, it’s just, it’s so outrageous, it’s unbelievable, that our country is run in such a manner. But so that, yeah, these are these the biggest concern. You have momentum, and our momentum, of course, we don’t have momentum. And so to get that momentum going, we need to get going ASAP, like immediately and and look, the US knows our vulnerabilities. I mean, Trump knows our vulnerabilities. We have very little negotiating leverage because we only sell to one I mean, we largely sell to one country. And if we had had, again, our development of resources, we could sell to multiple nations. That’s starting to happen with LNG. There’s some developments there. We’re selling some to Korea, some Japan. We need to have multiple countries that we sell to to keep the US honest. I mean, look, I love the US, and we should they. They’re always going to be our biggest trading partner, and we should be thankful they’re south of the border. They’ve protected us for the last number of decades and so on. Having said that, you can never just become so comfortable that you’re not competitive, and that’s what’s happened in Canada. We have to be competitive, and Trump knows that we are very dependent, and he’s using that against us and just letting this elongate and keep the pressure on. And that’s our fault. Largely, I don’t necessarily blame Trump. We’ve made ourselves incredibly vulnerable because of incompetent, poor leadership now for decades in this country.
James Connor 37:04
So just summarize what we spoke about here in the last few minutes. It sounds like you’re positive on the US economy. You might be a little concerned about the valuations we’re seeing in the s, P and the Nasdaq right now, but overall, you still like the markets, but you are concerned about the Canadian economy.
Jonathan Wellum 37:19
Yeah, yeah. Yeah. And having said, having said that too, with the concerns on the Canadian economy, we do have some great companies up here, and so they are leaders. And so if you are interested in the energy patch, we’ve got some great companies trading at some low valuations. So that doesn’t mean that there aren’t good companies in Canada to invest in. I think there are Americans actually coming up and and investing in some of our Canadian businesses. I mean, Cameco, we’ve owned now for a while. It’s getting a little bit more expensive, but, I mean, that’s a fantastic company, uranium, we’ve got some of our energy our oil and gas companies are trading at low valuations because they’re kind of in Canada, but they’re making lots of money, and if things are freed up a little bit, those valuations could go up a lot. So it doesn’t mean there aren’t investment opportunities in Canada, but boy, I wish there were a lot more, and I wish we were developing our resources a lot more quickly. Yeah,
James Connor 38:09
well, Jonathan, that was a great discussion, and I want to thank you for spending time with us today. I always enjoy our chats, because we can talk about Canadian politics, and if somebody would like to learn more about you and your firm, rocklink investment partners. Where can they go?
Jonathan Wellum 38:24
Yes, probably the easiest way at our website. So that’s just rocklink.com R, O, C, K, L, I, N, C, link with the C at the end. COMM info@rocklink.com will get you and yeah, we reach out to us. We love a number of clients that we’ve have through wealthion, and you can come in, there’s no pressure. We’ll sit down, give you a go over, listen, look at your portfolio, give you some comments. Tell you how we might make some changes. And yeah, so by all means, take advantage of that free consultation. And we love to talk to the different clients that come in in Canada here, and we’re licensed right across the country, so we’re all all the provinces, and love to hear from you,
James Connor 39:04
and we will have details below in the show notes. Jonathan, once again, thank you. Enjoy the rest of your summer.
Jonathan Wellum 39:09
Terrific. Thank you very much. Jimmy, great talking with you.
James Connor 39:11
There’s so much happening in the world right now, especially when it comes to geopolitics, and if you need help understanding how these events will impact your financial future, consider having a discussion with a professional financial advisor. You can find out more information@wealthion.com slash free. Once again, that’s wealthion.com/free
