I have not blogged for a while. Why? A number of large projects for one that required immersion, but more simply that while there was a lot of noise, the fundamentals had not changed with respect to two key areas of interest. The first that of investor protection concerns in Canada, the second, that of economic, market and financial imbalances in the global economy.
As far as investor advocacy is concerned, no change here: the CSA has stalled and more or less reversed course on two major initiatives, getting rid of mutual fund commissions and the move to best interest standards. The move towards upgrading a transaction led retail financial services framework, with minimal change to industry accountability, continues unabated; there is still no recognition of the fundamental responsibilities surrounding the provision of personalised investment advice in Canada (within the advisory sphere), even within the new targeted reforms and so called proposed “best interests standards”, and vested interests and regulatory infighting are stymieing any possibilities of change.
With respect to global financial, market and economic imbalances, again, no real fundamental change here: we remain in a deeply unsettling paradigm of low growth dynamics supported by debt and asset focused monetary excess; the marginal dynamic in the US is that of rewind vis a vis monetary excess, which will be destabilising.
There is however one dynamic that I would like to shine a light on: this is the hollowing out of the terra retail space by the likes of Amazon and the move by shareholder activists in a number of companies to ditch the business and sell the real estate.
The rise in income inequality and debt to help finance the growth deficit has led to lower interest rates, numerous financial crisis and a focus on asset price support by central banks. The asset price focus has raised real estate prices which has increased the attractiveness of selling retail properties relative to present values of terra retail profits. The rise in property prices has also increased the costs of terra retailing, increasing the attractiveness of remote online sales. The pressure on salaries and ultimately on operating margins by this dynamic risks further exacerbating income inequalities etc.
To me the cycle is one of concern:
Rising inequality forces an increase in debt.
Rise in debt increases sensitivity of economy to interest rates.
A rise in interest rates leads to financial and economic crisis, imperilling financial system.
Financial system supported via low interest rates and asset focused money supply without addressing income inequality dynamics.
Asset prices rise, present values of economic flows decline, income growth dynamics remain weak force move to lower costs and lower prices.
High asset prices, cost competitive imperatives forces retail to move out of terra, selling assets attractive.
Retail property turned into residential real estate for investors/higher net worth individuals.
Loss of service jobs further weaken consumption dynamics, increase reliance on low interest rates and asset price support.
We have lost sight of the fact that system design is critical to what you do within it. I see little or no evidence of any awareness of the overall system we are meant to be working towards.