When I think about the Caribbean, frankly I think about the beautiful beaches, friendly people and the sunny weather. When the COVID-19 pandemic hit, almost all tourism to these islands halted, cutting off an important source of jobs for the people and income for the government. Although the average Canadian might solely think about the Caribbean as an ideal vacation destination, millions of people live there; so what has the pandemic meant for countries in the Caribbean?
Background Information:
Before the pandemic hit, the Caribbean region was stagnating, seeing GDP (gross domestic product) growth of an average of 0.3% between 2014 and…
Democrats are calling it the most important election in a generation. Republicans are touting the job President Trump has done in a viable push for re-election. Only 20% of Canadians have confidence in Trump to even do the right thing on the global stage. But how would a Biden win compare to a Trump re-election for Canada’s economy?
Oil and Energy
Trump Re-election
Throughout his presidency, Trump has reduced regulation on drilling and pipelines, and has promised to continue that trend in a second term. …
JEC TORONTO — The price of used cars rose 5.4% in August, the largest monthly gain in the market since March 1969. The Core Consumer Price Index rose 0.4% in August, but the spike in the price of used cars made up 40% of that increase.
What Market forces are at play?
Favourable Lending Practises and Stimulus Package
Used cars are an inferior good, meaning that a decrease in income increases its demand. This helps to drive up prices. Moreover, interest rates have plummeted in the wake of the Fed’s monetary response to COVID-19, making it easier for consumers to borrow money to purchase cars, driving (no pun intended) up demand. In…
What are share buybacks, how are they different than dividends, and why they are not the culprit of growing inequality
Disclaimer: I am in no way an expert on this topic. The purpose of this article is to share my perspective and create a dialogue on the topic of share buybacks. If you find flaws or fallacies in my article, I’d love to hear your perspective!
The Basics of Share Buybacks
What are Share Buybacks?
Share buybacks are exactly what is implied by the name: companies buy back their stock. This method of capital allocation is a way for companies to return value to investors, and will usually occur when a company feels as though there is no alternative investment that they can make that would make the company…
Have you ever wondered where all those earnings go…?
An introduction to Capital Allocation:
Quite simply capital allocation is the way in which a company decides to distribute its financial resources. Capital allocation is extremely important in the success of a company; Warren Buffett says that capital allocation is now his primary job at Berkshire!
The broad goals of capital allocation are quite simple: to ensure the ongoing health and operation of the business, and to optimize the long term intrinsic value of the company. Really, it is the ways in which managers reinvest money to try and create the best results for investors. This is an incredibly complicated concept, and it is why…
Equilibrium is supposed to be the result of efficient markets, but without regulation, we are constantly “phished for phools”.
George Akerlof and Robert Shiller, both Nobel Prize-winning economists, published a book called Phishing for Phools, which takes a deep dive into how markets often do not offer the best result for individuals, and thus societies because they are forced to focus exclusively on profit motives.
So, let’s take a look at what being Phished for a Phool actually means, and why this concept is important when considering the role governments should play in protecting their citizens. Being Phished for a Phool occurs when, for psychological reasons or due to misleading information, an individual acts in a way that is…
Note: This article assumes you read the earlier article that describes and explains LBOs. If you have not read it and have no background on LBOs, check this out!
How are LBOs Financed?
In order to come up with enough money to successfully purchase a company without using large amounts of equity, private equity firms will take out the following types of debt:
Bank Debt
The concept of elasticity is an important concept when talking about economics, and thinking about the ways in which markets behave. Investors should also consider price elasticity as an important way to measure the value of a brand, and as a way to compare major competitors, especially in moderately competitive sectors.
Elasticity is the measure of how a change in the price of a product will change the demand for that product:
When considering the elasticity for various products, it is important to categorize them such that you are comparing apples to apples. For instance, a product like gasoline is…
A very basic economic principle quite simply states that as interest rates decline, inflation tends to increase. This is for many reasons, but most specifically, aggregate demand is composed of Consumer Purchases, Investment, Government Spending, and Net Exports. When interest rates decrease, the cost of borrowing decreases and thus investment increases. The same applies to the famous Phillips curve, which shows the inverse relationship between unemployment and inflation. When unemployment decreases, consumer spending increases, theoretically causing inflation.
It all makes quite a lot of sense, and for many decades, these were the principles used by Central Banks to ensure that…
This article is a follow-up to the previous one which covered the concept of competitive advantages, pricing power, and how they are the foundation of a good business. Now that we have a sense of the usefulness of competitive advantages, we can consider how a company can leverage them to build healthy economic moats, how these moats should be maintained, as well as what can lead to their erosion.
DISCLAIMER: This article references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
The Gist
“The single most…
