J. Kenneth Yurchuk writes: Good day Mr. Rubin, and thanks for taking our questions. I am curious about the juxtaposition of two of your recent prognostications. You predicted new lows were imminent for the TSX in early March, and you are predicting a return to record highs for the price of oil.
Considering the make-up of the TSX with its heavy weighting towards resource stocks, isn't it just a little counterintuitive to say the least, to expect a petro-weighted exchange to tank whan petro prices go through the roof?
Jeff Rubin: Don't work for CIBC World markets anymore and, hence, don't forecast the TSX anymore. However, there seem to be two important investment themes from the book. Oil prices are going up and we are moving to an inflationary world, marked by ever rising energy and food prices. The TSX, as you know, has a large energy and fertilizer component. You can take it from there.
Jon Seaby writes from Toronto: With all the money that is being flooded into the US economy, and for that matter the world economy, do you think that interest rates are set to rise considerably (i.e. like they were in the late 70's 20-25%) in the next 3-5 years globally, specifically in Canada do you see interest rates rising considerably (similar to the late 70's as well) in the next 3-5 yrs?
Jeff Rubin: Interest rates are generally a mirror on inflation. I believe inflation is coming back, hence i believe interst rates will move up sharply over the next couple of years. While I dont do investment advice any more, I will say this - if I had a mortgage, I would lock in now.
Jonathan Houle writes: Thanks for taking the time to answer our questions Jeff. Although you predict a contraction with respect to economic globalization (i.e.: supply chain costs being too high) , how do you think high fossil fuel prices will effect what I like to call "cultural globalization?"
By that I mean the spread of content, material, media, etc. over new mediums such as the internet. Could it be possible that this phenomenon simply be poised to grow even further due to the new found costs of travel and making "physical" content available to people? If you don't mind me asking, what role do you see the internet having in this new economy devoid of cheap fossil fuels.
Jeff Rubin: Interesting question - triple digit oil prices will disconnect us physcially with the rest of the world but, as you point out, not necessarily in an electronic sense. Will we substitute more use of the internet for the lost physical travel and contact? Don't know - but it's possible.
Bertrand Montel writes from Montreal: I tend to agree with your prospective analysis and we may indeed see a reduction in international travel and freight. While such trend may support some kind of relocalization of manufacturing, it may also have some unexpected consequences as to human capital / labor localization. I emigrated to Canada 6 years ago and I'm now a Canadian citizen. Easy and relatively cheap travel facilitated my emigration and I think it may have played a key role in international migration.
My concern is that OECD countries may see a significant decrease in immigration of qualified people who are more likely to want to travel back and forth to their homeland than people upon whom economic emigration is imposed. This may consequently prevent aging countries to succeed in relocalizing manufacturing. What are your thoughts?
Jeff Rubin: That's already started to happen. Immigration is tightening up in the US, UK, Australia and Canada as well. And as unemployment rises (a casualty of triple-digit oil), our willingness to accept immigrants diminishes, no matter where we are in the world. A smaller world may well translate into a more stationary world, not only for goods but for but people as well.
W. Leonard Waddingham writes from Brockville, ON: Where do you see this price of natural gas being in 6 months, one yr, two yrs & beyond?
Jeff Rubin: $5 per mcf by the end of the year and probably moving closer to the $7- $10 range over the next couple of years.
Sonali Verma, Globe Investor: Thank you very much for joining us. We really appreciate it.
Jeff Rubin: My pleasure. Thanks for all your comments and for reading the book. I will be on a book tour across the country starting next week and I encourage you to all come out and, hopefully, resume the conversation.
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