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Bullboard - Stock Discussion Forum Suncor Energy Inc T.SU

Alternate Symbol(s):  SU

Suncor Energy Inc. is a Canada-based integrated energy company. The Company's segments include Oil Sands, Exploration and Production (E&P), and Refining and Marketing. Its operations include oil sands development, production and upgrading; offshore oil production; petroleum refining in Canada and the United States; and the Company’s Petro-Canada retail and wholesale distribution networks... see more

TSX:SU - Post Discussion

Suncor Energy Inc > Where Have All the Economists Gone?
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Post by Experienced on Nov 14, 2021 10:27am

Where Have All the Economists Gone?

The world griped by runaway Government spending and inflation.  Most economists we see on TV seem to have forgotten Economics 101 and are simply mouthpieces for whatever political persuasion they happen to be addicted to.

The current round of inflation we are seeing was totally predictable and the solution is firmly rooted in traditional economic theory.  But somehow politicians and their economist lackeys are looking at other ways to combat the problem which entails spending obscene amounts of money which will not solve the problem but only make it worse.  The Biden "Build Back America" plan worth trillions of dollars is a classic example.  Trudeau continuing to spend money like a drunken sailor is an example closer to home.

So what is the solution that anyone getting at least B in Economics 101 would answer on an exam paper?

The natural brake historically to inflation is rising interest rates.  The problem today is that with all the rapidly increasing National Debts around the world that Central Banks have decoupled the natural relationship between inflation and interest rates.  They have not only refused to increase interest rates but in many cases have done the opposite - they have reduced interest rates.

Take for example the US 10 year Treasury rate which currently sits at around 1.6% and it is the benchmark for all other interest rates.  This current rate is actually LOWER than it was at the depths of the financial crisis in 2008!!!

With inflation rates in the US at over 6% and the 10 year at 1.6% it is no wonder the stock market is at an all time high and valuation for many companies are unrealistic since it makes little sense to invest in fixed income.  I sold all my fixed income investment a number of years ago and hold either cash to take advanatge of short term opportunities or equities.

The problem with all this is that the natural economic forces are being resisted by economists and politicians and just like the natural environment this can only be done for so long before the power of these natural forces overwhelm the system.  

The longer these forces are ignored or resisted, the more catastrophic the impact will be.

When will this happen?

Beats me and frankly I thought it would have already have happened but the inflationary pressures we now seeing suggests that that day may not be far off.  Another clue that this adjustment is not far off is the panic that we see at the political level.  The total of recent spending bills passed in the US are equal to TOTAL ANNUAL TAX REVENUE and the latest Biden proposal would make the total twice the total Government tax revenue - not good.

One can only hope that some sort sanity gains traction but as long as economists tout party lines and throw out their economics textbooks it isn't going to happen.

The lesson here?

Be careful and be watchful.  There is potential for the violence of the adjustment to make what happened in 2008 look like a walk in the park.  The parallels between has been going over the past decade and the 1920s is striking.
Comment by NPCexe on Nov 14, 2021 1:21pm
Great post, thanks. I find it very difficult to sell SU because I'm greedy and I thought by now it would follow its peers past precovid levels. It's still very much a giant part of my portfolio. I'm thinking I cannot extend the sell date for much longer, but then again SU is not a penny stock, so I'm hoping the crash won't be too sudden and too drastic. What so you guys think ...more  
Comment by Experienced on Nov 14, 2021 4:53pm
For what it's worth - here are my thoughts The trigger for a big change will be an increase in interest rates.  Once the Fed in the US announces an increase in the rate there will be a small selloff in the markets.  I would then sell no matter what as it is highly likely that the initial rate hike will be followed by at least two and probably more rate hikes. These rate hikes will ...more  
Comment by Co2Harvest on Nov 14, 2021 5:31pm
I'll add that selling or holding SU (and when to sell) maybe depends on your time horizon and your stomach for volatility. We truly are living in interesting times. It seems that many people have forgotten the value of natural resources. Young people are buying "virtual assets" like crypto and NFTs. Tech companies don't want us to own anything. Everything is offered as a service, ...more  
Comment by Experienced on Nov 14, 2021 9:35pm
Good points - thanks for the post and your thoughts....
Comment by Chad123 on Nov 15, 2021 12:36pm
When interest rates go up, tech will get squashed. If the Fed can lift rates little by little 0.25 each time and give the market ample time to digest the news, maybe the pull back won't be so drastic. If they missed the ball on inflation, especially the transitory BS, the impact could be significant. At the end of the day....have lots of cash and be diversified with your holdings. The other ...more  
Comment by Oldnagger on Nov 15, 2021 12:37am
Inflation will certainly undermine fixed income investments which will drive millions of senior pensioners to absolute despair. What is a safe home ? That is hard to say as those owning real estate could also be hurt as interest rates rise. Banks may be a mixed bag earnings go up but P/E ratios go down. Any over priced stock such as Tesla etc. could be murdered. Elon Musk has certainly figured ...more  
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