Consensus views prone to change

Although forecasts for the loonie and Canadian equities are encouraging, smart investors will continue to watch closely

The consensus view has Canada outperforming most of its G7 peers in GDP growth this year and next, trailing only the U.S., and not by much.

The consensus includes an International Monetary Fund (IMF) report last week that raised the IMF’s already high expectations for Canadian economic growth, to a lofty 3 per cent this year and a respectable 2.1 per cent in 2018. Last month, the Organization for Economic Cooperation and Development (OECD) weighed in with its assessment that Canada will lead all G7 countries in GDP growth this year. The Bank of Canada expects a 2017 expansion of close to 3 per cent. And Bloomberg’s latest survey of economists pegs GDP growth at 2.5 per cent this year.

But consensus views are prone to be errant, sometimes wildly so.

David Doyle, economic analyst at Macquarie Capital Markets Canada Ltd., has emerged as a contrarian to the consensus. And Doyle may have company if his worrisome soundings of the Canadian economy show signs of manifesting themselves as brakes on GDP performance.

Those signs of downside risk include flat GDP growth in July, after a very strong second quarter. July also saw a big drop in manufacturing sales. And there has been recent weakness in Canada’s two leading export sectors — energy and autos. In the three months through August, shipments of each declined at their fastest rate since the recession year of 2009.

One of Warren Buffett’s best-known expressions is that investors pay a heavy price for a cheery consensus.

So, encouraging as most of the forecasts are, successful investors in the loonie and Canadian equities — notably consumersensitive banking and retail stocks — will be those watching to see if weekly retail sales and monthly export revenues match the consensus or betray it.

America the Absent The U.S., chronically laggard in paying its UN dues, now proposes to renege altogether on its approximately $550 million (U.S.) in arrears to one of the UN’s major agencies, the United Nations Educational, Scientific and Cultural Organization (UNESCO).

In laying this additional brick in the wall of U.S. isolationism last week, the Trump administration made a specious allegation about UNESCO’s supposed “anti-Israel” bias.

But it was also candid in saying that it simply does not want to pay for services rendered by UNESCO.

As the world’s third-most populous country, the U.S. benefits from UNESCO as much as any region. But it doesn’t want to pay, which will make the U.S. a deadbeat.

Trump has scrapped U.S. participation in proposed trade megadeals with Pacific Rim countries and with the European Union; has divorced America from the Muslim world; and has soured U.S. relations with Latin America over the North American Free Trade Agreement (NAFTA) and in Trump’s callous disregard for Puerto Rico — a U.S. territory, no less — as Puerto Ricans struggle with the twin crises of hurricane damage and insolvency. Even Trump’s regard for NATO is noncommittal.

Though it might seem that Trump must be close to exhausting further means of isolating the U.S., regrettably that’s not the case. The way to bet is that there will be more and possibly worse to come. Those are self-inflicted wounds to America’s economic influence.

Canada and others would be welladvised to take the fullest advantage of the void Trump has created before the U.S. returns to its senses and seeks to reclaim influence.

That means redoubling Canada’s commitment to the UN, NATO, the proposed Trans Pacific Partnership and other means by which Canada earns favour as a world citizen and dynamic trading economy. Nature abhors a vacuum, of course, and Vladimir Putin shouldn’t be left alone to exploit this one. End of an era? Don’t hold your breath A few days after publishing an expose of Harvey Weinstein’s alleged sexual improprieties, the New Yorker proclaimed “The End of the Weinstein Era.”

If what’s suggested by that is an approaching dawn of workplaces safe from sexual harassment, assault, and rape, a cautionary note is in order.

In 2011, Mark Hurd was ousted as CEO of Hewlett-Packard Co., one of the world’s biggest high-tech firms, over alleged sexual improprieties with a hostess at H-P client events. Hurd was in the midst of a successful turnaround at H-P. That, surely, was the end of an era for powerful executives with feral-cat morals.

But no, that same year, Dominique Strauss-Kahn, head of the International Monetary Fund (IMF), was arrested on charges of sexual assault and attempted rape of a New York hotel chambermaid. The charges were ultimately dropped, but “DSK,” as he was widely known in his native France, ceased to be the great hope of the French left in recapturing the Élysée Palace.

In 2015, Dov Charney, a Montreal native, was ousted from American Apparel Inc., the Los Angeles garment maker he founded, over alleged sexual misconduct toward a multitude of the firm’s women employees.

This year, the CEOs of BetterWorks, a Silicon Valley HR firm, and Social Finance Inc. (SoFi), a fastgrowing U.S. online lending company, were forced to resign over alleged sexual improprieties.

Weinstein might once have been the most powerful executive in Tinseltown, but his firm had been in decline for years when it parted ways with him earlier this month. The sobering fact is that only when he was down did justice finally impose itself on Harvey Weinstein.

And as long as Donald Trump, boastful of his lower-regions groping, is CEO of USA Inc., talk of a new era in sexual propriety is farcical.

Though it might seem that Trump must be close to exhausting further means of isolating the U.S., regrettably that’s not the case