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Canada economy - secret sauce?


shalab
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Canada has achieved impressive gains in median wealth and income, where the median wealth has significantly outplaced the U.S - this is very impressive and it needs to be commended. In addition to it, Canada also has higher life expectancy compared to the United States. I am trying to find the secret sauce that has allowed this kind of prosperity.

 

Canada has about 8% of the US GDP and has 12% of the population. When I look at the sales of FAANGM in Canada, the revenue share is lower than that of the US on a percentage of GDP basis

 

Is this because of the lower spending capacity of a canadian family (higher taxes) or because of lower spending - i.e., higher saving?

 

AMZN: looks like sales are 1.5 - 2.0 B which is a small fraction of 230B

WMT: sales are around 20B which is around 6% of USA revenue

FB: 1.63 B - around 6% of USA revenue

AAPL: likely around 5-6% of USA revenue or lower - americas as a whole is 14% of USA revenue including south and north america

COST: This might be an exception it has 100 stores in Canada (~1/5 of US) and generates roughly 15% of USA revenue in Canada.

 

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No answer to your question - but a couple of observations:

 

One reason for higher median wealth in Canada is the importance of Canadian home values (particularly Toronto/Vancouver). Most of Canadians' net worth is tied to their home equity.  And as we know Canadian home values are unusually high and never really collapsed in the Great Financial Crisis of 2008-2009.

 

Costco in Canada has no club store competitors (Sams Club made a tiny attempt to enter Canada and but quickly folded up shop).  Costco US competes not just with a very significantly-sized Sams Club but also BJs Wholesale Club.

 

wabuffo

 

 

 

 

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Canada is a house of cards.

 

Unsustainable, unaffordable housing prices in biggest cities.

 

Big banks or an oligopoly acting as a cartel and a huge chunk of Canadian pension plans.

 

Alberta and Saskatchewan subsidizing socialist East or mainly Quebec and starting to have enough.

 

Uncompetitive, high taxes, foreign dollars moving out. HQ's leaving Toronto just like they left Montreal years ago.

 

A federal government spending like drunken sailors (well, stoned sailors now) with zero visible benefit and pushing a feel good leftist agenda.

 

Don't fall for current mirages. Time of reckoning is coming.

 

Cardboard

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Shalab, the biggest driver of wealth in Canada since 2000 is the housing bubble. Real estate has fuelled a great deal of proserity in Canada over the past 18 years.

1.) People’s net worth is at record highs; this has allowed for higher consumer spending (i know of many people who are spending part of their housing gain via their line of credit).

2.) government tax revenues from housing are at all time highs (property purchase tax, taxes on real estate commissions etc).

3.) employment in real estate related parts of the economy is at record levels (as a % of GDP); these sectors pay very good wages.

 

Look at US prosperity in 2005 and 2006. Their economy was booming. But evaluating how ‘successful’ the US was with its economy and even family wealth at that time would have been a mistake (as i am sure lots of people were sitting on significant unrealized real estate gains when calculating at their net worth); we all saw what happened to US consumers and their economy in 2008-12.

 

We sill see how Canada fairs in the coming years. Similar to Cardboard, i have my concerns. I think bubbles can be identified; however, it is impossible to predict the timing of when they will pop.

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Depends who you are...Are you the median? If you are trying to do better there are more headwinds due to confiscation via taxation compared to other countries. An investor in Netherlands pays 1.35% of their total capital a year. You will see this comes out to far less than Canada's top 20 to 24% capital gains tax on 1/2 capital gains. In Belgium, there is no capital gains tax. In UK or Ireland, a foreigner can for 7-12 years pay 20% of their domestic living expenses (like a HST tax) instead of any tax at all. So depends who you are. If you are naturally high income earner or investor and not the median, it is not so hot. If you are median or below it sure beats say Iraq or Ukraine as the transfers are more generous and corruption less. Red tape is middle of the road but not the lowest. I think part of the gains you mention are due to a closed system, partially protectionist.  However like China's 50k capital controls, you cannot always control around the edges, especially if there is discontent that can go in reverse. Personally I think the stats will change by a devaluation of the currency. I don't see any other way given the highest public and private debt in the developed world. Who will take on more debt? And if there is deleveraging, while other nations can still leverage or grow, that would also impact the currency. Some have argued for deflation but I don't see that except as a temporary situation.

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shalab, since you seem to have developed a fascination about the relative status of both countries, here's some info that you may find useful.

 

From a per capita and PPP perspective, the US has been and continues to be wealthier, by a wide margin. The median numbers simply reflect a lower (and growing slower) level of inequality.

 

International comparisons are often apples to oranges but the following (ends in 2012, but trends haven't really changed since then) publication uses three approaches that basically say the same thing.

 

https://www150.statcan.gc.ca/n1/pub/11f0027m/11f0027m2014094-eng.htm

 

The net worth value trends for the US and Canada have decoupled since the the recognition of the US housing bubble. One way to interpret this is that the US is one step ahead towards reconciliation with fundamentals. Disclosure: 75% of my net worth is in USD.

 

Another aspect to consider is that net worth for all age groups in Canada has continued to rise significantly (mostly because of housing), even during the 2008-9 episode, which has not been the case for all age groups 64 and under on your side of the border.

https://macromon.wordpress.com/2019/02/03/the-clash-of-generations-fed-china-and-the-sp500/

 

 

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Thanks for all the replies. I think PPP (purchasing power parity) may be the best reason all else being equal. The PPP may be because of taxes or high prices or both.

 

Looking at the examples I cited earlier - looks like the PPP is roughly about 0.75 in USD terms when living in Canada. This shows up in the sales for FB, COST, WMT etc.

 

So even though the Canada GDP is 1.8 trillion, from PPP stand point it looks as though it is 1.35 trillion USD from the sales of these multinationals.

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We keep hearing all the bad predictions about Canada‘s economy and the pending bursting of the “housing bubble” and its catastrophic effect.

 

Check out the thread here  “Garth Turner - Real Estate in Canada” in which Mr. Turner states...  “The big real estate bubble about to burst in canada”. Many board members agreed and believed the collapse was imminent.

 

However that thread and statement was in February 2012 - SEVEN years ago.

 

That still hasn’t happened and while prices may decline, certainly nothing has ‘Burst” since 2012.

 

This might have something to do with it:

 

10 Most Liveable Cities in 2018

1. Vienna, Austria

2. Melbourne, Australia

3. Osaka, Japan

4. Calgary, Canada (average home price $431,000 CAD - $328,000 U$)

5. Sydney, Australia

6. Vancouver, Canada (average home price $1,092,000 - $832,000 U$)

7. Tokyo, Japan

8.  Toronto, Canada (average home price $766,000 - $584,000 U$)

9. Copenhagen, Denmark

10. Adelaide, Australia

 

The first U.S. city on the list is Honolulu. But you won’t find it until  you get to #26 with an average home price of $800,000 U$.

 

As Canada is relatively welcoming to immigration, the laws of supply and demand kick in. Remember housing prices are only expensive in relation to one’s personal wealth. What may be expensive to me may well be cheap to an immigrant with a few hundred million in their back pocket.

 

It also seems that many investors from outside Canada don’t understand that, unlike the US a decade ago, a lot of our mortgages are in effect government guaranteed, others require a substantial down payment and in general our mortgages are not non-recourse loans. You can’t throw your keys on the banker’s desk and just walk away.

 

While our economy certainly has its problems, this is still not a bad place to live.

 

We also have an upcoming election that may show an improved change in direction should a new government realize that there is more to Canada than the two central provinces.

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Calgary as #3 most livable city in the world? ???

 

Weather apparently doesn’t count.

 

Now, I'm in a weak position for my argument that it's nice living here (Calgary) because I had to get my furnace serviced today to keep up with the -30 C weather. But, the weather here isn't as bad as people think. We have a significant portion of relatively warm days in the winter because of a weather pattern known as chinooks. Plus, it is one of the sunniest major cities, which I think is relatively more important to people's well-being (and livability) than temperature.

 

But on the other hand its pretty freakin' cold right now. I will still never move.

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We do have quite a bit of natural resources relative to the population.  Much of the canadian economy, directly or indirectly, seems to tie into that.  Farmland and oil are maybe the 2 biggest.  These things are just scarce on a global basis and we get outsized profits from them or from the service economy around them.  That is without having to do the kind of R&D that say a tech company does.  The US has these things as well but with 9 or 10 times the population, I don't know if there is as much easy natural resources on a per capita basis.

 

The other thing is defense spending, we just don't spend as much on it as the US.  That right there is a 2-3% gdp drag on the US. 

 

Maybe the US would be much more wealthy per capita if these 2 factors were leveled out.

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Calgary as #3 most livable city in the world? ???

 

Weather apparently doesn’t count.

 

Now, I'm in a weak position for my argument that it's nice living here (Calgary) because I had to get my furnace serviced today to keep up with the -30 C weather. But, the weather here isn't as bad as people think. We have a significant portion of relatively warm days in the winter because of a weather pattern known as chinooks. Plus, it is one of the sunniest major cities, which I think is relatively more important to people's well-being (and livability) than temperature.

 

But on the other hand its pretty freakin' cold right now. I will still never move.

Yep, that's what everyone in Alberta says... Well we have sunny days... or .... But it's a dry cold (yea, right). All you need to know is -30 C. That's COLD!

 

I got a buddy in Edmonton who always fantasizes about moving to Toronto where it's warm lol. He'd do that in a second too if over here we didn't loose our minds with the houses.

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Calgary as #3 most livable city in the world? ???

 

Weather apparently doesn’t count.

 

Now, I'm in a weak position for my argument that it's nice living here (Calgary) because I had to get my furnace serviced today to keep up with the -30 C weather. But, the weather here isn't as bad as people think. We have a significant portion of relatively warm days in the winter because of a weather pattern known as chinooks. Plus, it is one of the sunniest major cities, which I think is relatively more important to people's well-being (and livability) than temperature.

 

But on the other hand its pretty freakin' cold right now. I will still never move.

Yep, that's what everyone in Alberta says... Well we have sunny days... or .... But it's a dry cold (yea, right). All you need to know is -30 C. That's COLD!

 

I got a buddy in Edmonton who always fantasizes about moving to Toronto where it's warm lol. He'd do that in a second too if over here we didn't loose our minds with the houses.

 

Those of us in Calgary can always cling to the fact that at least we don't live in Edmonton...

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Calgary as #3 most livable city in the world? ???

 

Weather apparently doesn’t count.

 

Now, I'm in a weak position for my argument that it's nice living here (Calgary) because I had to get my furnace serviced today to keep up with the -30 C weather. But, the weather here isn't as bad as people think. We have a significant portion of relatively warm days in the winter because of a weather pattern known as chinooks. Plus, it is one of the sunniest major cities, which I think is relatively more important to people's well-being (and livability) than temperature.

 

But on the other hand its pretty freakin' cold right now. I will still never move.

Yep, that's what everyone in Alberta says... Well we have sunny days... or .... But it's a dry cold (yea, right). All you need to know is -30 C. That's COLD!

 

I got a buddy in Edmonton who always fantasizes about moving to Toronto where it's warm lol. He'd do that in a second too if over here we didn't loose our minds with the houses.

 

Those of us in Calgary can always cling to the fact that at least we don't live in Edmonton...

 

There are probably not many jobs there, but we once were travelling through the Lake Okanagan and Kootenay area, which is absolutely beautiful and appears to Canada’s banana belt. It’s probably costly though.

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Calgary as #3 most livable city in the world? ???

 

Weather apparently doesn’t count.

 

Now, I'm in a weak position for my argument that it's nice living here (Calgary) because I had to get my furnace serviced today to keep up with the -30 C weather. But, the weather here isn't as bad as people think. We have a significant portion of relatively warm days in the winter because of a weather pattern known as chinooks. Plus, it is one of the sunniest major cities, which I think is relatively more important to people's well-being (and livability) than temperature.

 

But on the other hand its pretty freakin' cold right now. I will still never move.

 

How many warm days do you need to have to psychologically make up for every -30 C day? I wouldn't move somewhere that -30 C (-22 F) was something that one could expect to happen from time to time.  And if I did there would be nothing I could say or do to get my wife to come with me, she thinks southern New Hampshire is too cold.

 

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I'm not sure how I would offset cold/warm days. I tend to bucket days into two categories - the type where I can go outside and do stuff with my kids (skating, sledding, zoo, etc) and the type where it's too cold. Because we have the wide wariation in temperature, there are lots of days in winter where the highs are 0-10 degrees C, which is great for winter activities.

 

I suspect we have a bigger variation than many places with similar average temperature in winter, which is lots of places.

 

I googled average temperature new Hampshire and got Concord: https://www.usclimatedata.com/climate/new-hampshire/united-states/3199#

 

January High/Low -1/-12 C

Feb Hi/Low 2/-10

 

Calgary

January High/Low 0/-13 C

Feb Hi/Low 1/-12

 

I'm not sure how that compares to the rest of NH, but the difference isnt really that significant. I can run my business from anywhere with halfway decent Internet, but I like it here. Different strokes, obviously! I would guess we average ~3-5 days where it gets to -30C per year.

 

 

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