Category: Canada

John Rapley is an author and academic who divides his time among London, Johannesburg and Ottawa. His books include Why Empires Fall (Yale University Press, 2023) and Twilight of the Money Gods (Simon and Schuster, 2017).

Pollsters report that we, and especially young Canadians, are gloomier than ever, with so many feeling so down about their economic future that they’re turning against democracy. Surveys reveal that increasingly, young people are showing greater openness to authoritarian leaders who threaten to break a system they already see as failing them. This echoes research in many developed democracies, revealing a growing radicalism and anti-system sentiment among young voters.

With the economic malaise all around, the cause might seem obvious. But our growing frustration also has deep roots, its origins lying in the postwar period now seen as the golden age of the West.

From about 1948, Western economies entered a long expansion that lasted until the early 1970s, during which time they grew at average annual rates in the range of 5 per cent to 6 per cent. Reflecting this buoyancy, asset values rose equally fast, with the index on the Toronto Stock Exchange growing at an annual average rate of more than 7 per cent.

All that added output and wealth not only generated higher incomes, it also filled the government’s coffers, enabling the expansion of higher education, public health care and the country’s pension system. But it also created a sense of limitless possibility. Believing that a new age of endless growth had begun, people and policy makers envisioned a world in which every generation would be richer than the previous one.

That allowed politicians to make pledges of future prosperity by projecting these growth rates and returns into the distant future. They thereby lengthened retirement with generous pensions and expanded social services. While this involved some pretty big long-term commitments, they were confident that future tax and investment returns would generate the money needed to fully fund them. Among ordinary people, what resulted was a culture of optimism and political harmony, in which a rising tide would lift all boats, making policy a win-win game.

This was, in the context of the time, a perfectly sensible belief. In a recent seminal paper, four economists found that people who grew up in a time of economic growth were less likely to take a zero-sum view of policy – in which benefits for some must involve cuts from elsewhere – than those who grew up amid stagnation or recession. Older Canadians who grew up in that golden age thus tend to be those who are most optimistic and trust the system to work to everyone’s benefit.

However, it is the zero-sum belief that wins out now. In the final quarter of the twentieth century, the economic growth rate began to slow, as is inevitable for advanced economies. Growth continued to slow and now, in some countries – Canada among them – it has gone into reverse (in per capita terms). One outcome of this is that policy has indeed turned into a zero-sum game, and it did so in two ways.

First, since tax revenues could no longer fund increasingly expensive commitments, governments began cutting their largesse, often first targeting programs that benefited young people. And so, university education stopped being free, or the contributions workers had to make to their pensions went up, reducing their net incomes.

Second, because promises of future largesse had been made on the expectation of steady rises in income that didn’t materialize, they made up the shortfall with policies that transferred income from workers to owners – among them the pension-funds, which relied on asset-income to support their beneficiaries. Thus, whereas economic growth slowed to a crawl and incomes barely kept pace with inflation, asset prices maintained their steady climb, with share prices on the TSX keeping to an annual average increase above 6 per cent – only modestly below that of the golden age.

One effect of this is that today, as a rule, the older you are in Canada, the more likely your income is higher than the previous generation’s at that age; and the younger you are, the more likely your income is lower than the previous generation’s at that age. Therefore, it’s just as reasonable for a young Canadian today to believe they’ll end up poorer than their parents’ generation as it is for their parents to believe they’re entitled to live better than their predecessors did.

That makes for an increasingly divided policy regime. If Canada were a business whose first few years saw rapid growth, leading it to make some big long-term spending decisions, it’s now facing the accountants, who are demanding it tighten its belt until its long-term income and expenditure realign.

At the same time, we probably all need to realign our expectations with the future. Owing to the expansion of higher education, the postwar period was a time of great upward mobility, as the children of construction workers became engineers and teachers. But with such a consequently larger middle class today, the pace of upward mobility is bound to slow.

It would be better if we found a model in which we all rose together – if at a more measured rate than we once took for granted.

As part of a previously negotiated share purchase agreement, Tekkorp now owns 15.91% of FansUnite’s outstanding shares, solidifying its position in the company.

Previously, Tekkorp held 7.61%. Since September 16, 2024, when an agreement was signed for the purchase of additional common shares and warrants, the investor has been growing its influence, and there may be further increases ahead.

FansUnite is listed on the OTC Markets in the United States under the ticker FUNFF.

Tekkorp Strengthens Standing in FansUnite Despite Difficulties

Back in September, Tekkorp bought 63.9 million common shares. Tekkorp’s holdings in FansUnite now total 46.7 million common shares, following the transfer of 30 million previously acquired shares, along with 12.5 million warrants that may be exercised.

The investment comes more or less a year after in 2023, Tekkorp first bought out 13.75 million shares in the company, and arguably before it faced some of its biggest challenges. Instead of backing out, though, the investor has decided to pursue further expansion and noted that it believed in FansUnite’s leadership.

FansUnite has had to consider some major moves over the past months. Notably, the company agreed to sell Betting Hero to GeoComply and Betting Hero’s co-founders. in June last year, seeking to patch up ailing finances.

The net proceeds of the deal were pinned at $20 million at the time of the deal, but the sale itself was estimated at $37.5 million.

At the time, FansUnite CEO Scott Burton said that the company had taken a long and hard look at its operations and had found the cash offer put forward by the buyers to have been substantial enough to merit acceptance.

“After extensive deliberation with our board and advisers, we believe it’s in the best interest to recommend the sale and allow the shareholders to vote on a return of capital,” Burton noted at the time.

It is not immediately clear what Takkorp’s plans for the business are and whether the company will pursue them. At the time, the investor’s decision would suggest that the firm is happy with the status quo and keen to increase its position, possibly in anticipation of an increase in FansUnite’s stock.

FansUnite’s Rough Downward Spiral  

FansUnite’s stock took a nosedive on August 29, when it was trading very close to zero until October 9, occasioned both by the sale of its primary asset – Betting Hero, but also naturally because the company delisted from, the Toronto Stock Exchange.

The capital was able to use around 90% of the proceeds from the sale to redistribute capital back to shareholders.

In the meantime, Tekkorp also picked a new partner for Africa, as the investor believes that the region offers untapped potential in the gaming sector and that the firm is keen to secure pole positions.

Tekkorp Holdings is a Las Vegas-based investor in the iGaming space.

You can read more about our top pipeline stocks at MillionDollarJourney.com and MoneySense’s best dividends feature. 

Housing prices in Canada might drop 

We don’t think housing prices are going to fall in 2025, but we are questioning if they could rise by 6.6% as Canadian Real Estate Association (CREA) has forecasted.

With 5-year bond and 10-year bond rates not falling as quickly as the Bank of Canada’s (BoC) key lending rate is dropping, fixed rate mortgages may go as low as home buyers hope. With decreased immigration targets and negative overall consumer sentiment, home buyers should continue to have more leverage than sellers in the major markets. This is especially true for the glut of condos currently for sale on the market. 

Oil will stay below USD$75 a barrel

“Drill baby drill” was heard along the U.S. election campaign trail in 2024. With the volume of American oil exports rising over the past few years, it will be interesting to see if the countries part of OPEC (Organization of the Petroleum Exporting Countries) would be willing to reduce supply in order to keep prices up. At some point those countries are going to get sick of a shrinking market share and cutting overall government revenues. Should that happen, supply might quickly overtake demand, as oil inventories around the world are already pretty full. 

With growth in China showing no signs of getting back to its former oil-needing glory, we don’t see where increased demand is going to come from to soak up all the extra oil the world is ready to pull out of the ground.

BYD will lengthen lead over Tesla

Last year, we forecasted that Tesla’s declining profit margins could start to catch up with the aggressive valuation of its stock price. We didn’t foresee, though, Tesla CEO Elon Musk becoming a key cog in the Trump machine. 

No matter how much Musk has the ear of the new president, it may not be enough to shield Tesla from the EV competition outside of North America. With Musk now splitting time not only between his various corporate roles, but also as head of the new “Department of Government Efficiency” (DOGE), his eye is pretty far off the ball—it’s fair to say. It looks like he’s doing his best to quash the enviable reputation Tesla enjoyed among eco-conscious consumers. Add on to that that the U.S. government may be cutting subsidies to EV buyers. Tesla could see tough times, no matter what.

However, that doesn’t even account for the corporate freight train headed its way. Build Your Own Dreams (BYD) is one of the most interesting companies in the world. It’s emerged from the intense inner-China competition for the EV market as a lean, mean, electric machine. Toss in BYD investor Warren Buffett’s money, influence and connections, and it didn’t surprise us that BYD recently stated that one out of every five EVs sold in the world today is made by BYD.

This is TFSA Trouncers, a series that profiles Canadian investors who’ve accomplished incredible feats with their tax-free savings accounts. If you have grown your TFSA to half a million dollars or more, drop us an e-mail at dakeith@globeandmail.com or fill out this form. You may choose to be anonymous, but we do require an e-mail address and may request a screengrab of your portfolio for fact-checking purposes. We’ll also be profiling people who haven’t been so lucky with their TFSAs.

Able, 65, lives in Toronto and was a captain with the city’s fire services before retiring on a pension in 2016. In 2015, he bought a stock that took his tax-free savings account to more than a million dollars (verified by screenshot).

As an investor, he is a fan of Peter Lynch, a fund manager who regularly beat the market a few decades back. His books reveal that many of his stock picks were based on what he and others consumed. Due diligence often consisted of trips to the shopping mall with his wife.

Able remembers the events leading up to his big stock pick. It all began late one night when an alarm call came in for a fire at a medical marijuana facility, operating under the name of Bedrocan.

After the fire was extinguished, he got to talking with the “key holder” of the facility and learned that Bedrocan was a subsidiary of Canopy Growth Corp. WEED-T. He also learned that Canopy traded on the Toronto Stock Exchange, where its value was tied to how many clients it had.

Able, who had a medical marijuana card, was one of Bedrocan’s customers in 2015 when the company “dropped the price of their flagship strain from $8.50 to $5.00 per gram.” He knew they would quickly gain a lot of new clients from this move.

Furthermore, the federal Liberals had made a promise in the 2015 election to legalize marijuana for recreational use. Given the price reduction on medical marijuana and the party’s pledge on recreational marijuana, he decided to load up on Canopy shares in his TFSA.

The shares began to climb and then soared after April, 2017, when the Liberal government introduced the promised legislation in Parliament. In addition, Constellation Brands, a marketer of alcoholic beverages, announced a major investment in Canopy during 2018.

“Soon I had over a million dollars in my portfolio,” Able said. “It was exhilarating.” But the speed and magnitude of the rise was increasingly making him uneasy. As a user of marijuana, he knew that a large proportion of recreational users were buying from the underground market.

Able then got out of Canopy while his capital was still above a million dollars. The trigger was watching an interview featuring billionaire investor, Mike Novogratz: “He said: ‘If I was long cannabis stocks, I would sell; if I was speculating I would short,’” Able recalled.

Unfortunately, aside from his familiarity with Mr. Lynch’s approach, Able is not, as he says, a “sophisticated” investor. His subsequent stock picks took his TFSA down to $530,000. It could have been worse if not for investing in Yogen Früz because of his fondness for its frozen yogurt.

While Able was managing his TFSA, he became concerned about his marijuana usage. Thanks to Marijuana Anonymous, he has been free of the substance for several years.

“Using marijuana was a double-edged sword for me,” he says. “Because I knew about it, I was able to invest in it, but because I was a user, I was enslaved to it.”

Able now delegates the management of his capital to professionals. He is especially pleased with having his TFSA money in the pooled funds of money managers Phillips, Hager & North. Their diversified funds have low fees and are growing his capital, which is now at $600,000.

Able and his wife have registered retirement funds and non-registered accounts, as well. An annuity that he purchased separately from his TFSA provides a guaranteed annual income of $20,000, in addition to his pension.

What an expert says

We asked Lori Pinkowski, senior portfolio manager and investment adviser with Pinkowski Wealth Management at Canaccord Genuity Corp. for her thoughts on Able’s TFSA investing.

Able discovered a strategy used by many great investors: leveraging personal experiences to spark creative ideas for new investments. However, personal experience can only take you so far. For an idea to succeed, it must be backed by an analysis of company fundamentals and diversified within a portfolio of strong ideas.

Another principle Able followed was knowing when to sell. People often get emotionally attached to stocks, especially DIY investors, and end up holding on for too long. If Able still held Canopy today, he would be down over 40 per cent year-to-date, while markets and our portfolios are up 20 to 30 per cent.

While Able’s story is inspiring, there are lessons to be learned. His story is like winning the lottery – life-changing for a lucky few, but unrealistic for the majority.

For investors aiming to grow their portfolios, diversification is key. Earning consistent, stable returns through an active strategy should lead to long-term investment success. Additionally, leaning on investment professionals for advice is far less stressful and allows you to sleep better at night – especially in retirement.

Able could likely have improved his returns by taking two key steps: consulting a professional earlier and avoiding most mutual funds. Mutual funds often take a buy-and-hold approach to investing, which may not provide enough risk management. Fees are typically higher, and returns lower.

With a TFSA that was worth over $1-million, plus other registered and non-registered accounts, Able’s portfolio would benefit from greater flexibility and transparency. Switching to an active investment strategy with individual blue-chip stocks could likely help him better align his portfolio with his long-term goals and legacy.

Lori Pinkowski’s views, including any recommendations, expressed in this article are her own only, and are not necessarily those of Canaccord Genuity Corp. Canaccord Genuity Wealth Management is a division Of Canaccord Genuity Corp., Member-Canadian Investor Protection Fund (CIPF) and The Canadian Investment Regulatory Organization (CIRO).

Larry MacDonald is a regular contributor to The Globe and Mail and author of a new book, The Shopify Story: How a Startup Rocketed to E-commerce Giant.