Deficit Data Dump

The Parliamentary Budget Officer has released new projections for the Federal deficit and debt in the years to come.

Here's what you need to know: 

  • The deficit for the year is expected to be $328.5bn, down from earlier projections of $343.2bn.
  • The federal debt-to-GDP ratio is projected to reach 48.3% by 2022-23, up from 31.3%.
  • Economic growth is expected to be higher than previously projected. 
Go deeper:

  • A key measure of financial sustainability is the debt-to-GDP ratio: how much debt is owed as a share of the country's GDP.
  • Canada's debt-to-GDP ratio is still well below its peak of 66% in 1995-96.
  • The economic climate is very different now too: interest rates are low, which means the cost of sustaining the Federal debt is as low as its been in decades.
What's next: 

  • For now, the Parliamentary Budget Officer has said the Federal goverment's finances are sustainable, but "barely."
  • A higher debt-to-GDP ratio makes the Fed's finances more vulnerable to economic shocks like a worse-than-expected second wave or a rise in interest rates. 
  • But reducing spending and paring back emergency support programs during COVID may be even more painful.
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Amazon Bets on Canada

Amazon is placing its bets on Canadian talent, announcing plans to hire 3,500 tech and corporate roles in Vancouver and Toronto. The lions share, 3,000 jobs, will be in Vancouver bringing the city's total Amazonians to 8,000 by 2024. The 500 Toronto employees will bring that city's corporate headcount to 1,600.

Spin Outs and Side Effects
  • There are approximately 75,000 tech jobs in Vancouver with the average wage of $84,000. The addition of even more high paying jobs will intensify the battle for talent and attract more migration and immigration to the area.
  • $1.05 billion of venture capital was invested in Vancouver based companies last year. It's not uncommon for big tech employees to leave to start start-ups of their own. The growth of companies like Amazon and others in the city should help the startup and venture scene.

Real Estate Repercussions
The pandemic has led to a big shift towards work from home, a culture many tech companies plan to keep in place even post-covid. Amazon intends to continue to allow the "flexibility" of work from home, but adds that their employees "really value being able to be together."  Last November they leased 1.1 million square feet in The Post, a new complex being built in downtown Vancouver to make room for employee growth on top of their existing downtown offices. New Toronto employees will be housed on five floors of 18 York st.

Bottom Line: Amazon employs 21,000 full and part time employees across Canada, with plans to hire many more in corporate, tech and fulfillment roles. The e-commerce behemoth impacts our lives on a daily basis, and while we're optimistic about the jobs being created, let's keep an eye on some their less than savory labour practices.
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MEC Melee

Members of Mountain Equipment Co-Op, Canada's largest cooperative, are stepping up their fight against the sale of the beloved Canadian outdoor store to California private equity firm Kingswood Capital. The latest affront to members is the hiring of Jay Taylor to be the company's new President and COO once the deal is done.

Jay Who? Taylor is currently the CEO of LALO Tactical, which stands for Light Assault Lo-Vis Operator, a maker of military style boots. LALO's marketing is positioned heavily towards military and police with aggressive pro-gun slogans. He has also posted on social media with the hashtags #alllivesmatter and #bluelivesmatter, which are controversial in their contrast to the Black Lives Matter Movement.

MEC Members are not happy with the hiring, calling Jay Taylor "a totally wrong fit," among other less kind descriptions. The group Save MEC has raised over $100,000 to fight the sale and has collected thousands of signatures of members in support.

MEC-MENTUM
Kingswood looks to be standing by their man, referring to him as an "accomplished executive in the outdoor industry." With a court hearing this week to close the deal, there's not much upset members can do.
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Grabby Google

Google is giving the middle finger to app developers who rely on the Google Play store to reach millions of customers by demanding their 30% cut of in app sales. The tech giant is currently facing down a lawsuit, alongside Apple, over this very issue.

Epic Lawsuit
Epic Games took Apple and Google to court last month after getting booted from the Apple App Store for trying to skirt the payment rules. Epic's suit claims the cut is in violation of anti-trust law. The maker of Fortnite also took Apple to task with a PR campaign that is now subject to a counter suit.

Google Doubles Down
Google's latest provocation comes in the form of a blog post which says they'll no longer allow some apps to get around these rules. The rule breaking apps, which include Netflix and Spotify, will have until September 30, 2021 to comply.

What's The Deal?
All signs are pointing to Google battening down the hatches, preparing for a long fight to keep their fees. Closing the loop holes and treating all apps equally is likely designed to help their case. They certainly aren't backing down.
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Fracking Pension Plan

The Canadian Pension Plan Investment Board (CPPIB ) is under fire for its ownership of Crestone Peak Resources, a Colorado company involved in the controversial practice of fracking.

Quick Refreshers
What is the CPPIB?  The CPPIB is the body that oversees and manages the Canadian Pension Plan, a retirement pension eligible to all Canadians over the age of 60 who have contributed through their working years. The CPPIB has $434.4 billion in assets under management.

What is Fracking? Fracking is the process of drilling into the ground and shooting a pressurized fluid into that hole in order to release and recover gas in in the earth.

Crestone Backstory
CPPIB setup Crestone in 2015 to purchase 51,000 acres of producing oil and gas land from Encanna Corp for about $600 million USD. Earlier this year the company spent another $400 million USD, with a commitment to spend up to another $310 million USD to buy 100 acres from ConocoPhilips.

What's the Big Fracking Deal?
  • Fracking is one of the most controversial forms of fossil fuel extraction, known to damage the environment and send pollution, including the toxic chemical benzene, into the air.
  • In 2017 Crestone allowed volatile organic compounds to drift towards children on a playground just 25 metres away. The company was fined, and the site was shut down.
  • Another 19 notices of violations have been issued to Crestone from Colorado's oversight body.
  • 1,100 citizen complaints regarding noise, smell and air quality have been lodged against Crestone since 2015.
  • Crestone is a uniquely complained about company, 1/3 of all complaints to the state regulator are about them.

CPPIB's Position
Canada's pension managers talk the talk when it comes to climate change, calling the issue "one of the world’s most significant physical, social, technological and economic challenges.” But they continue to hold $11.6 billion of assets in conventional energy. A spokesman for the CPPIB says "there are attractive opportunities in the oil and gas sector that remain today, and, we believe, into the future.”

On the other hand, the pension doubled their investment in renewable energy year over year to $6.6 billion.

Big Picture: Institutional investors are no longer insulated from politics, people are increasingly insistent the businesses and organizations they transact with are aligned with their values. CPPIB works for all Canadians, although protected from undue political influence, shifts in public opinion and activism may force them to shift their allocations.
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Peak Picks

  • Are your friends getting married during COVID? Here's what you need to know.
  • Learn about Bandcamp, the anti-Spotify music streaming service.
  • In June, Twitter suffered a serious security breach. Wired explores how they survived it and their plans to prevent another hack on Election Day.

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Leftovers

Trump: An explosive New York Times investigation into President Trump's tax returns found years of losses and tax avoidance.

Tik Tok: A judge blocked President Trump's TikTok app store ban hours before it was expected to take effect.

COVID: Grocers are stockpiling goods in advance of a second wave of COVID-19.

Nova Scotia: Locals are clashing Mi’kmaq fisherman over their court granted right to fish in territorial waters.

Trains: Ottawa is close to making a decison on Via Rail's high-frequency train proposal between Toronto and Quebec City.

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Certain Uncertainty

Between the challenges of voting during a global pandemic and President Trump's recent comments around a peaceful transition, invetors are betting that the outcome of the presidential contest will be far from clear on election day and they're looking for ways to profit on the uncertainty.

There's been a spike in financial product that are usually tied to uncertainty in the market. Here's a few examples:

  • Traders are using the Cboe Volatility Index to get protection from wild spikes in the market after election day.
  • Currencies are also a favourite with traders tying the election outcome to swings in the value of specific currencies. Some investors have placed future bets against the Russian Ruble, predicting that a Biden presidency will pose significant policy risk for the Russian Federation.
Bottom Line: Investors know as much as much as we do about the outcome of the election (which isn't much). But that won't stop them from making bets...
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Notorious ACB?

President Trump announced Amy Coney Barrett as his pick to be the next US Supreme Court Justice.

Who is she? Amy Coney Barrett is a 48 year-old judge for the U.S. Court of Appeals for the 7th Circuit. She received her JD from Notre Dame and clerked under late Justice Antonin Scalia from 1998-1999.

Where does she stand on the issues: Barrett is a favourite among conservative activists and is expected to push the courts to the right if confirmed. Here's what you need to know:

  • As a professor at Notre Dame, Barrett was a member of the University Faculty for Life, an anti-abortion group, until 2016. She has previously expresssed her own conviction that life begins at conception.
  • Barrett disagreed with Justice Roberts' decision to uphold the Obama Administration's affordable care act and many believe she could threaten the health care of millions of Americans.
  • On the Seventh Circuit, Barrett consistently voted in favour of corporations. In a recent case, she ruled against drivers claiming that Grubhub owed them overtime pay they were entitled to.
What's next: Now that the President made the appointment, it's up for the Senate to confirm Barrett. In a controversial move, the Republican majority in the Senate is pushing to appoint Amy Coney Barrett before the Presidential election on November 3rd.

Senate Judiciary Committee Chairman Lindsey Graham has said he plans to hold a vote on confirmation as early as October 22nd.

However, the Democrats are currently assessing their options on if and how they could delay the vote till after November 3rd. Some ideas being brought up are an impeachment vote either against Attorney General William Barr or another vote targeting President Trump, both would delay the Senate's confirmation process.
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Put them on ICE

Hootsuite, the Vancouver-based social media management software company, has cancelled a contract with ICE (US Immigrations and Customs Enforcement) after a employee revolt over the deal.

ICE What? US Immigrations and Customs Enforcement (ICE) is the government agency responsible for enforcing cross-border crime and illegal immigration laws. Recently the agency has come under fire for the inhumane detention of illegal immigrants, including the forced sterilization of detainees.

How did Hootsuite get involved: Hootsuite sold ICE a contract worth of $500,000 USD which, according to ICE, would be used to educate the public about their work.

After learning of this deal Sam Anderson, a Product Trainer at Hootsuite, spoke out against it in a widely shared Twitter thread. Her thread forced the CEO of Hootsuite Tom Keiser to respond and announce that the company would no longer be participating in the deal.

Zoom out: An increasingly progressive tech workforce will continue to force companies to think twice about who they do business with.

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