Letter from the President:


On June 3, 2009 I walked up to the Wall Centre Hotel to hear ex-CIBC Chief Economist, Jeff Rubin, speak about his recently published book Why your World is About to Get a Whole Lot Smaller. The book’s subtitle was “Oil and the End of Globalization” and his thesis was that the world was about to experience “Peak Oil” and much higher oil prices – $200 per barrel or more. Rubin made a strong case. The book even won the National Business Book Award in 2010. The world was facing oil shortages and prices were going higher, so thought Rubin.

And Rubin wasn’t alone. An industry taskforce in the U.K. concluded in 2008 that the risk from falling oil production in coming years is greater than the threat posed by terrorism (Guardian, October 29, 2008).

12 years later, the world is looking a whole lot different.


Late last year, my rather right-leaning 89-year-old Dad gave me The Green New Deal, a book by economic theorist Jeremy Rifkin. The subtitle to Rifkin’s 2019 book is “Why the Fossil Fuel Civilization Will Collapse by 2028, and The Bold Economic Plan to Save Life on Earth”. In the introduction he quotes that “around a $100 trillion of assets could be carbon stranded”. “Carbon stranded” is a phrase Rifkin uses a lot in the book.

Rubin had argued that we don’t have enough recoverable oil to support the world economy, and Rifkin now argues we are going to leave trillions of dollars of it in the ground! Huh? In 2008 and 2009, the world feared a lack of fossil fuel. Today we fear fossil fuel. What a difference a few years make.

What Rubin missed was the effect technology would have on oil markets, at least in the short term. In his book, he notes that the peak U.S. oil production was just shy of 10 million barrels per day in 1971. By 2009, US production was down to 5 million barrels per day and dropping. But by 2019, the U.S. was the world’s biggest producer at 13 million barrels per day. What changed?  Primarily the introduction of fracking operations in the shale formations of the Permian Basin in West Texas, and the Bakken Formation in North Dakota.

Rubin has been mostly wrong about oil prices, but he could be right about Peak Oil. Consider this quote from Bloomberg on November 31, 2020:
“A year ago, if anyone in the petroleum business had suggested that the moment of Peak Oil had already passed, they would have been laughed right off the drilling rig. Then 2020 happened.

Planes stopped flying. Office workers stayed home. “Zooming with the grandkids” replaced driving to see family. A year of global hunkering yielded the sharpest drop in oil consumption since Henry Ford cobbled together the first Model T. At its worst, global demand dropped by a staggering 29 million barrels a day.

As a once-in-a-century pandemic played out, British oil giant BP Plc in September made an extraordinary call: Humanity’s thirst for oil may never again return to prior levels. That would make 2019 the high-water mark in oil history. (Randall/Warren)”

Did we witness Peak Oil in 2019?

If we have, it may not matter much to prices as Rifkin has turned the argument upside down. Peak Oil will be overcome by Peak Demand. The Green New Deal outlines the new economic shift where the energy that drives the world’s economy comes not from carbon sources (oil, gas, coal), but from renewables (solar, wind and maybe geothermal and nuclear).

Yet again, we are living in interesting days!


On April 22 and 23, Biden held The Leaders Summit on Climate. The Summit was held virtually with live streaming for public view. It appears that the Biden administration wants to showcase that “America is back” on climate change. Biden is promising to cut emissions in half by 2030 from 2005 levels. This is nearly double the target that Obama agreed to as part of the 2015 Paris Climate Accord.

The EU is targeting a 55 percent cut by 2030 from 1990 levels and plans to be carbon neutral by 2050. The U.K. will cut emissions by 78 percent from 1990 levels, and Trudeau announced that Canada will reduce emissions by 40 to 45% below 2005 levels by 2030.

A last minute addition to the conference (he agreed to attend the day before it started), President Xi Jinping of China, the world’s largest current carbon emitter (US is number 2), didn’t make a specific pledge but did say that “China has committed to move from carbon peak to carbon neutrality in a much shorter time span than what might take many developed countries.”


The “environment” has become the focus of thought leadership throughout the world today, and this applies as much to investing as it does to politics. ESG, also referred to as “sustainable investing”, is increasingly cited as crucial in the process of evaluating the prospects of companies. A report in Morningstar shows that 25% of investments into U.S. stock & bond mutual funds last year went to ESG funds, up from 1% in 2014. Marketing departments in the investment world are falling all over each other trying to get ESG-themed funds to market.

It would be an unwise manager who did not consider sustainable factors or ESG when making investments. But this has always been the case. It’s what good managers have always done, and what they are still doing today, whether they call it ESG or “sustainable” or just smart investing.

This is from a recent letter put out by EdgePoint Wealth, a manager we respect:

“Assessing environmental, social and governance (ESG) factors has been a part of our investment approach since day 1. Overlooking ESG issues would interfere with our ability to compound wealth for our investors over the long term. We believe good companies often have a well-constructed approach to business sustainability and make strong considerations towards ESG issues.

As investors, we do not view our jobs as buying pieces of paper to be traded. Instead, we are taking ownership stakes in businesses that will be held for the long term. Before taking an ownership stake in a business, a tremendous amount of research and analysis is performed. We often follow a company for years before investing in it. Throughout this rigorous due diligence process, we look for any signs that ESG issues could pose material long-term implications to our potential investment (e.g., exploitation of workers, management character, environmental contagion, unsafe working conditions, excessive remuneration, allocation of capital, conflicts of interest, etc.). There have been times when we chose not to invest in a business because of potential ESG concerns.” (March 12, 2021)

Rubin is a smart guy. He was the Chief Economist at CIBC World Markets. But he made a bad call on oil. It happens. Smart people make mistakes. They load up on Kodak, Nortel, oil, gold, cannabis or Bitcoin and they are convinced it is the right thing to do at the time. Sometimes it is, sometimes it’s not. This is why we diversify.

Our approach is to manage wealth using portfolios diversified by asset class, geography, sector and holdings. Too much exposure to one idea, one stock or one sector can damage a portfolio. If our managers make a mistake and invest a small allocation on what turns out to be a bad idea, we move on.