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Are US politics bearish or bullish for your portfolio? – BNN

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For the most part, it’s all noise and while the degree of spending and taxation does matter for earnings and earnings drive the markets along with interest rates and inflation expectations, the current debt ceiling dance is a lot of noise. History shows that government shutdowns have had mixed results. And while that risk has been kicked to December for now, debt default risk is coming up quickly.

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One of my favourite macro analysts, Larry Macdonald, best selling author of A Colossal Failure of Common Sense and founder of the Bear Traps Report will join me this week to talk macro and we’ll focus on the shenanigans in Washington surrounding the political fight over debt ceilings, budgets, and infrastructure.

Macdonald suggests that many investors are most interested in whether or not McConnell will cave and help lift the ceiling eventually? There are two off-ramps, two paths* towards lifting the ceiling. The GOP is trying to pin the debt ceiling increase on the Dems, to them, this is an important chip they want in their back pocket heading into the November 2022 midterms. The Dems want to spend in a big way. They will do whatever it takes to sell inflation as transitory, they want revenge for the 63 House seats and nine senate seats lost in the 2010-2014 elections. They believe GOP forced austerity (2010-2016) was the growth killer and they desperately want to go big now, BEFORE the midterms. Likewise – Hawks are being sacked left and right inside the Fed as we speak. It’s a real hawk purge. We think the Dems want a left, MMT style shift at the Fed. Dems want to use the newly appointed Doves to help finance a colossal fiscal expansion. We just don´t see enough foreign demand for US Treasuries looking out 12-18 months if the Dems GO BIG.

Path 1: Dems agree to fold the ceiling into reconciliation and pass that entire bill, which is probably now closer to $2TR top line (not sure how much offset via tax increases but could be $1TR or more). The downside (for Dems) in our view is that it gives Manchin/Sinema/Tester/ (the blue dogs) a lot of leverage to take the top line/tax hikes down. Or does it give progressives more leverage? They might not care about a default. Progressives – Nancy – Chuck and the Blue Dogs all come together and pass a $2T reconciliation bill and raise the debt ceiling, yes, but this is two to three weeks away MINIMUM with a lot of drama before any deal.

Path 2: Wait until the bitter end and hope McConnell will cave. The risk of that option is a potential credit downgrade from the rating agencies. Fitch already warned this Friday, saying political brinkmanship with the debt ceiling could lead to them to downgrade the U.S. sovereign credit. Corporates can not have a higher credit rating than the sovereign so the risk of a sovereign downgrade could reverberate through the credit space (although limited initially until an actual downgrade does occur). More realistic is an equity selloff to pressure politicians on both sides of the aisle to agree on a timely debt ceiling increase. This is what happened in 2011.

The next two weeks are critical. The CBO estimate of a debt ceiling breach is between Oct. 15 and Nov. 5. If we take the average, Treasury may start to (technically) default on its debt around Oct. 25 (Yellen’s 18 Oct. estimate is deemed conservative). If we assume reconciliation can still pass through the committees and get on the floor in 2 weeks, it means that without any progress in the early part of the week of Oct. 11, markets will start to discount the increased risk of a technical default. Fitch warned last week that a downgrade is possible. S&P broke the US “AAA” rating in 2011. A second downgrade has meaningful implications.

The Treasury will be out of cash to pay bills in the coming weeks. This chart is updated weekly if you want to follow along.

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Interestingly, all this just as very optimistic Q3 earnings are hitting the tape.

Our Fall 2021 Investors Guide to Thriving Virtual Roadshow will begin Oct. 7 and run every week until Dec. 9. Each week we will cover a key part of your portfolio from how to protect against inflation risks to generating yield and income. This week we will have Larry Macdonald as our guest to discuss macro market risks and opportunities and to take your questions. We’ll look at his top ETF picks and where the best opportunities lie even as Washington is dysfunctional.

Follow Larry online:

Twitter: @LarryBermanETF

YouTube: Larry Berman Official

LinkedIn Group:  ETF Capital Management

Facebook: ETF Capital Management

Web:  www.etfcm.com

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Politics

‘Disgraceful:’ N.S. Tory leader slams school’s request that military remove uniform

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HALIFAX – Nova Scotia Premier Tim Houston says it’s “disgraceful and demeaning” that a Halifax-area school would request that service members not wear military uniforms to its Remembrance Day ceremony.

Houston’s comments were part of a chorus of criticism levelled at the school — Sackville Heights Elementary — whose administration decided to back away from the plan after the outcry.

A November newsletter from the school in Middle Sackville, N.S., invited Armed Forces members to attend its ceremony but asked that all attendees arrive in civilian attire to “maintain a welcoming environment for all.”

Houston, who is currently running for re-election, accused the school’s leaders of “disgracing themselves while demeaning the people who protect our country” in a post on the social media platform X Thursday night.

“If the people behind this decision had a shred of the courage that our veterans have, this cowardly and insulting idea would have been rejected immediately,” Houston’s post read. There were also several calls for resignations within the school’s administration attached to Houston’s post.

In an email to families Thursday night, the school’s principal, Rachael Webster, apologized and welcomed military family members to attend “in the attire that makes them most comfortable.”

“I recognize this request has caused harm and I am deeply sorry,” Webster’s email read, adding later that the school has the “utmost respect for what the uniform represents.”

Webster said the initial request was out of concern for some students who come from countries experiencing conflict and who she said expressed discomfort with images of war, including military uniforms.

Her email said any students who have concerns about seeing Armed Forces members in uniform can be accommodated in a way that makes them feel safe, but she provided no further details in the message.

Webster did not immediately respond to a request for comment.

At a news conference Friday, Houston said he’s glad the initial request was reversed but said he is still concerned.

“I can’t actually fathom how a decision like that was made,” Houston told reporters Friday, adding that he grew up moving between military bases around the country while his father was in the Armed Forces.

“My story of growing up in a military family is not unique in our province. The tradition of service is something so many of us share,” he said.

“Saying ‘lest we forget’ is a solemn promise to the fallen. It’s our commitment to those that continue to serve and our commitment that we will pass on our respects to the next generation.”

Liberal Leader Zach Churchill also said he’s happy with the school’s decision to allow uniformed Armed Forces members to attend the ceremony, but he said he didn’t think it was fair to question the intentions of those behind the original decision.

“We need to have them (uniforms) on display at Remembrance Day,” he said. “Not only are we celebrating (veterans) … we’re also commemorating our dead who gave the greatest sacrifice for our country and for the freedoms we have.”

NDP Leader Claudia Chender said that while Remembrance Day is an important occasion to honour veterans and current service members’ sacrifices, she said she hopes Houston wasn’t taking advantage of the decision to “play politics with this solemn occasion for his own political gain.”

“I hope Tim Houston reached out to the principal of the school before making a public statement,” she said in a statement.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Saskatchewan NDP’s Beck holds first caucus meeting after election, outlines plans

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REGINA – Saskatchewan Opposition NDP Leader Carla Beck says she wants to prove to residents her party is the government in waiting as she heads into the incoming legislative session.

Beck held her first caucus meeting with 27 members, nearly double than what she had before the Oct. 28 election but short of the 31 required to form a majority in the 61-seat legislature.

She says her priorities will be health care and cost-of-living issues.

Beck says people need affordability help right now and will press Premier Scott Moe’s Saskatchewan Party government to cut the gas tax and the provincial sales tax on children’s clothing and some grocery items.

Beck’s NDP is Saskatchewan’s largest Opposition in nearly two decades after sweeping Regina and winning all but one seat in Saskatoon.

The Saskatchewan Party won 34 seats, retaining its hold on all of the rural ridings and smaller cities.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Nova Scotia election: Liberals say province’s immigration levels are too high

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HALIFAX – Nova Scotia‘s growing population was the subject of debate on Day 12 of the provincial election campaign, with Liberal Leader Zach Churchill arguing immigration levels must be reduced until the province can provide enough housing and health-care services.

Churchill said Thursday a plan by the incumbent Progressive Conservatives to double the province’s population to two million people by the year 2060 is unrealistic and unsustainable.

“That’s a big leap and it’s making life harder for people who live here, (including ) young people looking for a place to live and seniors looking to downsize,” he told a news conference at his campaign headquarters in Halifax.

Anticipating that his call for less immigration might provoke protests from the immigrant community, Churchill was careful to note that he is among the third generation of a family that moved to Nova Scotia from Lebanon.

“I know the value of immigration, the importance of it to our province. We have been built on the backs of an immigrant population. But we just need to do it in a responsible way.”

The Liberal leader said Tim Houston’s Tories, who are seeking a second term in office, have made a mistake by exceeding immigration targets set by the province’s Department of Labour and Immigration. Churchill said a Liberal government would abide by the department’s targets.

In the most recent fiscal year, the government welcomed almost 12,000 immigrants through its nominee program, exceeding the department’s limit by more than 4,000, he said. The numbers aren’t huge, but the increase won’t help ease the province’s shortages in housing and doctors, and the increased strain on its infrastructure, including roads, schools and cellphone networks, Churchill said.

“(The Immigration Department) has done the hard work on this,” he said. “They know where the labour gaps are, and they know what growth is sustainable.”

In response, Houston said his commitment to double the population was a “stretch goal.” And he said the province had long struggled with a declining population before that trend was recently reversed.

“The only immigration that can come into this province at this time is if they are a skilled trade worker or a health-care worker,” Houston said. “The population has grown by two per cent a year, actually quite similar growth to what we experienced under the Liberal government before us.”

Still, Houston said he’s heard Nova Scotians’ concerns about population growth, and he then pivoted to criticize Prime Minister Justin Trudeau for trying to send 6,000 asylum seekers to Nova Scotia, an assertion the federal government has denied.

Churchill said Houston’s claim about asylum seekers was shameful.

“It’s smoke and mirrors,” the Liberal leader said. “He is overshooting his own department’s numbers for sustainable population growth and yet he is trying to blame this on asylum seekers … who aren’t even here.”

In September, federal Immigration Minister Marc Miller said there is no plan to send any asylum seekers to the province without compensation or the consent of the premier. He said the 6,000 number was an “aspirational” figure based on models that reflect each province’s population.

In Halifax, NDP Leader Claudia Chender said it’s clear Nova Scotia needs more doctors, nurses and skilled trades people.

“Immigration has been and always will be a part of the Nova Scotia story, but we need to build as we grow,” Chender said. “This is why we have been pushing the Houston government to build more affordable housing.”

Chender was in a Halifax cafe on Thursday when she promised her party would remove the province’s portion of the harmonized sales tax from all grocery, cellphone and internet bills if elected to govern on Nov. 26. The tax would also be removed from the sale and installation of heat pumps.

“Our focus is on helping people to afford their lives,” Chender told reporters. “We know there are certain things that you can’t live without: food, internet and a phone …. So we know this will have the single biggest impact.”

The party estimates the measure would save the average Nova Scotia family about $1,300 a year.

“That’s a lot more than a one or two per cent HST cut,” Chender said, referring to the Progressive Conservative pledge to reduce the tax by one percentage point and the Liberal promise to trim it by two percentage points.

Elsewhere on the campaign trail, Houston announced that a Progressive Conservative government would make parking free at all Nova Scotia hospitals and health-care centres. The promise was also made by the Liberals in their election platform released Monday.

“Free parking may not seem like a big deal to some, but … the parking, especially for people working at the facilities, can add up to hundreds of dollars,” the premier told a news conference at his campaign headquarters in Halifax.

This report by The Canadian Press was first published Nov. 7, 2024.

— With files from Keith Doucette in Halifax

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