You know, every year I do a forecast and I hope that world events don’t careen out of control and embarrass me so completely that I have to run and hide.

 

And every year, the same thing happens. World events careen out of control and embarrass me completely.

 

Except I have nowhere to run to and I’m not a big fan of hiding, being more of a stand up and face the music kind of guy. So here I am – facing the music and for this Forecast, it’s a funeral march.

 

That said, three quarters of the way there and I am still retaining my sanity. I think.

 

OK, back to the matter at hand. The soon to be headed to the dustbin look into my lunatic and most wrong forecast.

 

It’ ssuper wordy so I have done my best to trim it down, especially the rambling narratives about US politics which I have gotten mostly wrong and clearly don’t understand anymore. But, really, who does?

 

 

Broad Themes

 

 

The basic starting point for any good forecast, or at least mine, is the establishing of what I call “broad themes”. By making them broad, they are really unaccountable and don’t count to the grade, but I can reference them at will and make myself seem smart.

 

I had three, and they aren’t surprising, because they are in the news. All. The. Time. But they matter and if you are going to take anything from this forecast, plan your life around these three critical themes.

 

• Donald Trump – agent of chaos

 

• Inflation and affordability

 

• Trade wars and geopolitical (in)stability

 

Each of these will in some way inform and influence all that follows

 

 

Politics and Stuff

 

 

• My prediction for Canada was Mark Carney is anointed as the saviour of the Liberal Party and in the election that should be held by October, it turns out he wasn’t and Prime Minster Pierre Poilievre takes the wheel.

 

 

Well, whaddya know. We had an election (in April and not October) and the saviour and presumptive leader of the Progressive Conservatives, one Mark Carney, led the Liberals to a remarkable comeback win and minority government. He did it by bludgeoning the NDP, stealing PC votes from the conservatives and looking like the mature and somewhat bland economist that he actually is.

 

 

 

• South of the border, the new Trump administration is going to be an unchecked and proverbial bull in a china shop, or, as so brilliantly articulated by comedian John Mulaney – a Horse. In a Hospital. Based on his campaign promises we can expect immediate action on tariffs, releasing of January 6 rioters, tax cuts, debt ceilings, the appointment of a veritable rogues gallery of Fox News castoffs, sycophants, hucksters and, surprisingly, a couple of really pretty decent picks.

 

Specific forecasts were:

 

• The bromance with Elon Musk has a shelf life of about six months. Trump got what he wanted out of him, but once the inauguration is over, he won’t want Musk hanging around too much longer.
• Assuming he gets the appointment, the first cabinet appointee to GET FIRED is going to be RFK Jr. Soon after Pete Hegseth will be forced to step down due some scandal.
• Ukraine won’t get thrown as far under the bus as everyone thinks, but Trump isn’t a fan so it’s going to be a rough ride.
• The US will not buy Greenland. Or the Panama Canal.
• Canada is about to go through some things.
• A lot of these policies will prove to be not very popular with everyday Americans because they are inflationary. Interest rates will not come down and the price of everything will go up.

 

It’s safe to say that Trump is more like the Horse in the Hospital than the Bull in the China Shop. No one knows what he is going to do next, not even him. As for the predictions. Canada is indeed going through some things. Greenland and the Panama Canal have not yet been purchased. Elon is out of the White House. RFK Jr was appointed but is not yet fired. And Hegseth had a scandal but has yet to resign. Also, pretty correct on Ukraine. Inflation is up and interest rates had a wee 25 basis point cut and employment is dropping. Grade C

 

 

• Geopolitical instability is something I mentioned as a theme and it is real and it should scare everyone. From Russia-Ukraine to Israel-Hamas (the cease-fire will never hold) to Iran vs everyone to China-Taiwan, instability is the story that won’t end. In my view, the chief architect of all of this is of course Vlad “the Impaler” Putin and his ill-advised and criminal invasion of Ukraine. I do not foresee any significant de-escalation in this conflict in the short term as the bare-chested buffoon continues to call up 100s of thousands of new conscripts to be used as cannon-fodder for an increasingly battle-hardened if under-supplied Ukrainian army. There is no victory in this war. That said, we now have Trump and his Putin-leaning foreign policy in place and he did promise to end the war in 24 hours. I will give him a pass on the clock but I do see a Trump foreign policy towards Russia and Ukraine to be one of “stop the fighting” and appeasing Putin over the interests of Ukraine. The decision will ultimately be Ukraine’s but the slowing down of arms and support from the US will be the end. China will not invade Taiwan in 2025. That is a 2027 plan when Trump is in lame-duck mode. India is only interested in India. The Israel-Hamas-Gaza conflict will move into an awkward détente, but Iran is going to get squeezed super-hard by Trump and what comes out may not be very pretty. Africa continues to be an afterthought to most of the “first world” except as a repository of minerals and war. In an ideal world, Venezuela becomes a democracy again, but I do not see that happening.

 

 

So where to go on this one. There were cease fire proposals in Ukraine and a minerals deal and Putin is basically getting what he wanted from the US. But Ukraine keeps fighting and Putin is now in full “win over the civilian population by killing them” mode. There was a meeting with Putin that led nowhere and recently, a seeming reversal by the US on their support for Ukraine. This is incomplete. Europe is stepping up. We will see. China has not invaded Taiwan. Israel continues its war on Hamas, bombed Iran, the US joined in and we may soon have a shaky cease fire. Grade is C so far.

• Will we have a recession? There will be a recession – it’s probably already here. But the question you should be asking is if it is going to a real, textbook recession or is it going to still be a recession of perception or a media recession – a vibecession if you will – good lord, if 2025 can give me anything, rid me of this term.

 

We are screwed. We have tariffs. We will most definitely have a recession. The only consolation is that the US will have one too. Grade Incomplete

 

• Speaking of tariffs – what is going to happen? My prediction is that we are going to get tariffs of up to 25% within the first 100 days of the Trump presidency. These will be broad based and exclude nothing but will ultimately be removed over time.

.

 

Hmm, I kinda got this right although it was implemented then paused then reversed then modified then targeted and yet now punitive as well as broad-based at a lower number for some stuff and higher percentages for others. The end result is tariffs on Canada of between 10% and 50% and a sputtering economy. Looks like the first salvos of trade “negotiation” saw the Digital Services Tax disappear. Can supply management be far behind? Let’s see how the rest of the prediction unfolds. Grade B

 

 

• I know I said trade wars so I should probably elaborate. According to Donald Trump’s basket of promises, pretty much everyone is going to be the target of tariffs, not just his closest and longest tenured allies with whom he has a free trade agreement that he negotiated. The only countries that seem to escape the tariff wrath are Russia and Saudi Arabia.

 

He has a honeymoon period to implement all of this tariff nonsense and bluster and the legislative branch is too chicken to stand up to him but that just needs time to change. The American public writ large has NO IDEA what a tariff is or who it impacts,. Don’t believe me? Ask them. I’ll wait… See what I mean? At the end of the day, politicians care about themselves. If they feel at risk from the electorate, the worm will turn. Give it time. The people need to feel the pain and they 100% will. By September, the tariff furor will have run its course and will have been adapted to a bunch of tactical measures. The bloom will be off the rose.

 

Again – kinda right here but not fully. Everything he has implemented comes with arbitrary deadlines, then delays, then walk backs and escalations. Give it time. As it currently stands, everyone has tariffs. They are too high but not as stupidly high as they were on liberation day. The US is collecting record tariff revenue and to this point, the American public is still bamboozled into thinking this is a good thing being paid by other countries. When in reality it’s a tax on the US consumer. Give it time. The market will do the heavy lifting. Grade C/incomplete

 

• Crypto! Fine, I give up. It’s a thing. Buy it if there is a lot of liquidity. If things tighten, sell it. ETF’s are a pretty good play. Monorail.

 

The US has a strategic crypto reserve and everyone is piling into coins and losing their shirts. But Bitcoin is up so … Monorail. Oh and don’t forget gold. Grade B

 

 

Energy and Stuff

 

• Driven by still high levels of energy insecurity and high prices, the energy sector is going to continue its gradual transition from a fossil fuel centred colossus of emissions to an “all of the above” source of diversified and, occasionally, low-cost energy.

 

ESG box-ticking is dying a slow death, especially in the US and the financial world. We are soon to find ourselves in a golden age of poking holes in the ground.

 

This feels like it isn’t going to age well given the gutting of Biden Era green energy plans and the sudden resurgence of Trump’s interest in coal. The US is short power. This is a weird way to address this, and I guess I should have seen it coming, but coal? Really? Drill Baby Drill is not happening, but the US is reporting record domestic production. It’s all so confusing. Grade F

 

• Peak Oil Demand, much celebrated around the ESG world has been pushed back, yet again. My forecast is global demand for oil in 2025 will surpass 104.5 mm boepd. Similarly, demand for natural gas will continue to grow to record levels.

 

Current run rate suggests 104 mm boepd and record gas demand. I would like to give myself and A and a gold star but the year ain’t over. Grade Incomplete.

• A prevailing theme across the energy sector (and the economy in general) is going to continue to be cost.

 

Costs are certainly set to rise across the board for everything, especially with tariffs on, critically, steel and aluminum. We’ll see how it plays out over the year – interest rates may decline further into a recession and if the tariffs come off, everything will seem cheaper for a time but it’s an illusion. Grade Incomplete.

• Notwithstanding the urge to Drill Baby Drill, Capex in the oil and gas sector is going to be flat in the United States while Canada will see moderate growth. Expect US Capex growth to be sub-5%. In Canada, capex could grow up to 10% depending on LNG Canada and, of course, f-ing tariffs.

 

With demand growing, expect other areas to spend to grow production. Africa will be a major beneficiary and of course Brazil is going to commit to a lot of capex and growth and ultimately fail to deliver. As they always do.

 

OPEC++++ will observe Canada, Mexico and the US destroy each other with tariffs and silently chuckle to themselves.

 

I was feeling really confident about my projections for Capex in both the US and Canada up until mid year and now think I should have been more contrarian and called for declines of 5% in both countries. Feels smart in light of the current price deck where no one makes money. The tariffs put a real thaw into E&P spending that is only now unwinding. Rig counts in the US may have bottomed low utilization for frac crews is a major concern.… yuck. That said, production hasn’t rolled over yet. Grade Incomplete.

 

• The price of oil though 2025 is going to remain volatile. End of year price for oil is $69.47 (WTI) and the average for the year is going to be $72.37. This makes me a bear.

 

Oil closed on September 30 at $62.37, and the current direction is down, which feels all wrong. Average for the year to date is $67.33. Looks stable but it is anything but. Volatility rules. Grade Incomplete, failure imminent.

• Gas giveth, and gas taketh away. Last year was probably one of the more disappointing years for natural gas in my memory, rivalled only by the year before. My year end call for natty is $4.67 per MCF and my average for the year is $3.75. I am a gas bull once again. Don’t ask me why. Maybe I shouldn’t have taken an edible before writing this.

 

Gas bull says what? Prices have been decent so far this year, except in places where it is free, like Texas and Alberta. Natty at the end of Q3 was $3.28 per MCF and the average was $3.45. If it was the end of the year I would take a moral victory. But I can’t. There is no telling what can happen from here. Grade Incomplete.

• According to the EIA weekly reports The US closed out 2024 with 13 mm bpd of production. According to their Short Term Energy Outlook they will close out 2025 with production of 13.5 mm bpd – 3% growth. But with my prediction of a sub 5% increase in domestic US Capex, I projected year end 2025 US production of 1 mm bpd.

 

Trying to predict supply is a bit like trying to predict Trump. Actually, it’s nothing like trying to predict Trump. But the theory is the steady state requires massive capital spending and absent big growth in capital spending, flat to declining production is the order of the day. That said, where prices are at currently suggests we could lose 500 thousand to 1 million barrels per day of production in a tariff/recession world. It’s going to get ugly out there and crruent production according to the EIA has surged to close to 14.5 mm bpd. Something has to break. Grade Incomplete.

• In Canada, I’ve got production growth again ahead of expectations driven by higher overall capex and suggested it wouldn’t be unreasonable to expect a 2%-5% increase in Canadian oil production over the course of the year and a similar increase in gas production. More important will be the 7,000 wells drilled over the course of the year.

 

Well, someone was bullish on Canada. I hope it doesn’t get too embarrassing. Pretty sure I will miss the wells, but oil production is at record highs. Is the Carney Catalyst going to get us a shiny new pipeline? Will that matter for Canadian production? Probably not, but shipments are rolling (well sailing) out of LNG Canada. Fingers crossed. Grade Pending.

• OPEC +++++++ production is going to managed and driven by price, inventories and the Saudi budget. Rather than forecast production, I’m going to instead forecast that at least 1 mm of spare capacity will be brought back on-line by year end.

 

OK, this is an incomplete as at September 30, but so far this year OPEC Super 8 and others have announced that 1.3 mm boepd will be added with another 411k coming in August. And are now talking about adding another 500k bbls and maybe just removing all voluntary caps. Super helpful for the Permian guys, but they don’t play by our rules. Grade B, it’s almost true – since actual additions so far are way less than theoretical production.

• I am bullish energy stocks for the year.

This trade isn’t working quite the way I thought due to price volatility, and Canadian names as always are getting punished. Q1 the sector was up about 10% and then Q2 was a disaster, but names have crawled back in Q3. YTD return is just over 5% in the US and … 16%! (wtf) in Canada. It is rumoured that Mr. Buffett likes CNRL. So do I. We have so much in common! Three months to go. Grade Incomplete

 

• The M&A market should be strong again this year except for that one nasty variable. Cost of capital. And tariffs. We will always have tariffs. I see at least one big’ish Canadian name being taken out this year. Maybe it will finally rhyme with Cenovus. Canada is “AFFORDABLE” and American buyers should be paying attention to the Northern Dollarama.

Absent the tariff and trade war uncertainty a strong M&A market should come to pass. Jury is out for the time being but we’ve had a few corkers. Whitecap buying Veren; Tourmaline buying Saguaro and the parcelling off of Strathcona Montney assets as it pivots to heavy oil and makes a play for reluctant bride MEG who is also being woo’ed by Cenovus (there goes that takeover). Also, Sunoco bought Parkland (cross-border alert!) for $9 billion which was not on my bingo card. US M&A has become gassier. Grade Incomplete.

 

• And my evergreen M&A statement on Canada for all you American readers: Canadian companies are well-known for their technology and solutions-based approaches to innovation and there is a well-worn path of US PE and strategics coming north of the border to snap up cheaper Canadian tech. Also, Canada is a currency advantaged, undervalued and stable market for consolidators tired of the madness in other markets. Show me the money people!

 

Evergreen statement that I should make into an inspirational poster. Maybe I will. Come to Canada, we are calm and have our shit together. Well except that our prime minster wrote a book about how he wants to leave fossil fuels in the ground. Grade Incomplete.

• The Canadian dollar is lucky to be at $0.69. It will be lucky to be there at the end of the year. I give it $0.67.

 

Early in the year, the Canadian dollar was getting pounded by the Trump Tariff attention. Then a funny thing happened – the US dollar started getting pounded because of the Trump tariffs, which pumped up the Loonie. Go figure. But $0.719 isn’t so bad. Maybe we need a Crypto reserve. Or, I don’t know, gold reserves. Or a pipeline. Grade Incomplete.

 

• Inflation will continue to cool off over the course of the year in Canada but will continue to be an emerging and largely self-inflicted problem in the United States. I expect inflation in Canada to be at the bottom of the policy range by the end of 2025 and for the US to be stubbornly above it for much of the year.

 

Well, this is a forecast for the year, so I need to wait, but directionally it feels like I am on track here. Tariffs help. CPI in the US and Canada at end of August was 2.9% and 1.9% respectively. Grade Incomplete.

 

• Central banks will be elated at all the policy room they have to combat the economic chaos that is likely to ensue from the Donald Trump induced tariff madness. Expect as much as 150 basis points in rate reductions in Canada over the course of this year, especially as tariffs come in hot and heavy and we need some demand stimulus. In the United States, I am anticipating possibly 50 basis points towards the end of the year.

 

So far we have 75 basis points cut in Canada – I may have been overly aggressive with 150 but another 50 could easily happen as the economy slows. The US finally cut rates by a non-remarkable 25 basis points. Grade C+

• Leaving this here intact: There will be a lot of talk this year about major export-oriented infrastructure but depending on election results, this may not go anywhere. While there is a business case to export LNG to Europe from the East Coast, there is still no business case to get that gas to the East Coast. LNG Canada will come online soon and there is a strong possibility for expansion – a new Conservative government would likely be well-served to communicate its willingness to support a second train. Cedar LNG is also underway but it’s a relatively smaller project. Here in Alberta, hopes are being pinned on a whole lot of Carbon Capture projects worth billions, and we are inching toward actually doing some of them, but that’s all 2024-2030 investment and, depending on what happens with the carbon tax, emissions rules and Donald Trump, they might all go by the wayside in a puff of methane. On the renewables side, Alberta will continue to be the national green pariah for its robust support of the oil and gas sector and for pausing new project approvals while also continuing to lead the country in actual wind and solar investment. It’s fun to live in a place so full of contradictions. Kevin O’Leary has his monorail project near Grande Prairie but that has as much chance of happening as a man having a baby (gratuitous Montreal reference since that’s where the Canadian huckster is from). Finally, there is still some rumbling that Trump would revive the Keystone XL project but the cognitive dissonance that this would cause given its purpose of importing Canadian crude and his tariff plans might be too much to overcome.

 

This is a “to come” item. Everyone talked a good game on the campaign trail, the government rammed through it’s C-5 “let’s build now” act and we now have the “Major Projects Office” located in Calgary and led by a Bonafide energy executive. But we have yet to see any substantial proposals for big energy infrastructure, although we did a recent proposal for a proposal from the Alberta government. Grade Incomplete.

 

• My two favourite Canadian E&P picks are Suncor and ARC Resources. Arc for gas and Suncor for an oily turnaround story.

 

Suncor September 30 price was $58.24 vs Dec 31 of $51.31 so it looks pretty good, up almost 15%.  good until tariff day. ARC started the year at $26.07 and closed the quarter at $25.38 which is disappointing. We are talking full year results though, so let’s wait.

 

• On the service side, it seems like it’s always a crapshoot. My first pick is South Bow, which is the spinoff of the crude and liquids pipeline business from TC Energy. My second pick is CES Energy Solutions.

 

South Bow has done OK going from $33.93 to $39.38, which is pretty flashy for a pipeline company. CES on the other hand has gone from $9.92 to $9.39, which feels distressing until you account for it dropping like a stone to under $6 on Liberation Day.

• In the United States I typically pick a producer and some weird flyer that no one has ever heard of that destroys my credibility. This year I went political. Trump’s Energy Secretary pick is Chris Wright, formerly CEO of Liberty Energy CEO and his Department of the Interior pick is Doug Burgum, who comes from North Dakota, so I picked Whiting Petroleum Corp is the one to go with. I have nothing but confidence in these picks.

Liberty Energy is the poster child for “don’t quit your day job to work in government”. The stock has gone from $19.18 to $12.34 at the end of Q3 – a big dent in Mr. Wright’s net worth. Whiting completed a merger with Oasis Petroleum and renamed itself Chord Energy just to F with my process. At the end of Q3 the price was $84.08, down from $116.92 – clearly out of tune.

• Bonus stock pick? Saputo. When the chips are down, I like to eat cheese.

This is my “trade irritant” pick. Plus, cheese. $24.99 at December 31 and $33.80 on September 30. It’s aging really well!

• Sports? Sure. Super Bowl – Detroit beats Baltimore. Sorry Steve. Stanley Cup – Carolina beats Colorado. NBA – Knicks beat Oklahoma City.

Super Bowl – Grade F

Stanley Cup – Ugh. Another F

NBA – what was I thinking? I love OKC and their Canadian content and the Knicks folded like a cheap tent against Indiana (more Canadian content). Another F.

That’s it!

 

That was exhausting.

 

My time here is done.

 

Invest wisely.

 

Do as I say, not as I do.

 

Don’t gamble on sports.