Juggling Dynamite

With the price of Western Canadian Crude hovering around $30 a barrel (WTI @ 46-13.30)–and likely to go lower for longer from here–one would expect that new projects that require a West Texas Intermediate (WTI) price of $80 a barrel to break even would be cancelled or postponed.  And that is happening.  But one would be wrong to assume that means Canadian oil sands production (some of the most expensive on the planet even before full accounting of its environmental costs) will be falling from here.

Thanks to sunk costs in projects considered too far along to turn back now, Alberta alone will add at least another 500,000 barrels a day –about a 25% increase — to an already oversupplied North American market by 2017.

All those governments and companies banking on a quick rebound in oil revenues, might want to invest some serious work in developing a viable Plan B….  See:  The Oil-Sands Glut is about to get a lot bigger

As oil flops around near its 2009 recession lows (brown box below), the Canadian dollar has already said “Canada’s worse this time” with a decisive break to a lower low at the end of August (red circle below) and in September still falling, today within a hair of its recent 52 week low.  And indeed compared with Canada’s standing among other OECD countries before the 2008 recession, the economy is in fact worse today on several key metrics. See a few here: Canada’s economic slide (since 2006) in 5 charts.

Most importantly, the commodity supercycle that ran from 2001 to 2008 is now over, and that makes Canada’s financial prospects worse than at any time in the last 15 years.

Revenue is falling and not likely to bounce back soon, just as Canadian households are the most indebted they have ever been and realty prices some of the most over-valued in the world.  All of this underlines the glaring price risk apparent in Canadian REIT (below in navy) and financial shares (purple) as well as the broader TSX (in red) which today remains perilously dependent upon these last two now rightsizing sectors.

On the upside, for those who can see the big picture and minimize downside exposure today, a future of investment opportunity at much lower prices ahead looks bright.  With Canada’s financial strength much worse this time, and the resource-centric Venture exchange (in green above) and the Canadian dollar (in blue) already acknowledging this with a move below their 2009 cycle lows, the obvious question is, does a similar acknowledgement now await the broader market, financials and REITs?

For those with cash, patience and discipline today, the odds have very rarely been as good.

The province of Ontario has launched a new set of traffic laws as part of its ‘Making Ontario Roads Safer Act’ aimed at changing social tolerance for distracted driving.

“If current collision trends continue, fatalities from distracted driving may exceed those from drinking and driving by 2016,” a statement from the Ministry of Transportation said.

At a news conference Tuesday, Transportation Minister Steven Del Duca said he hopes the new law will raise awareness of the dangers of distracted driving.

“Research also tells us that a driver who uses a cellphone while driving is four times more likely to be involved in a crash,” Del Duca said.

“We all know that drinking and driving has become unacceptable in our society, and we need to make sure that the same thing happens with distracted driving.” Here is a direct video link.