2021 Predictions

2020, what a year. It seemed like what could go wrong, did indeed, go wrong. As we enter the last turn into 2021, a lot of people are looking for a fresh start and a sense of normalcy. They’re looking for a more stable, and less volatile 2021, in all walks of life - socially and economically. However, how I see 2021 unfolding is actually quite similar to 2020. COVID-19, which is the main culprit for all the instability, does not know the difference between 2020 and 2021. All the struggles that we have endured over the past 9 months will not miraculously vanish on January 1st. The virus will remain and continue to have major implications for our daily lives. How you and your business navigate through this time will have an impact for years to come. In this article, I make 5 bold predictions. These predictions are mainly focused on the broader economy, however, they are wide-ranging in nature, and will impact many Canadians as we enter the New Year.

1. Canadian Household Debt Skyrockets

It is no secret that Canadians love houses, condos, and heck if you’re in Vancouver or Toronto, a $2 million dollar tear down. In order to facilitate the housing boom that Canada continues to witness is, inevitability, debt. Debt used to be a shameful four-letter word. But in recent years it has become so commonplace that the average Canadian household owes $1.77 for every dollar they make. For example - you earn $100,000 but you owe $177,000. What makes this stat even scarier is that interest rates are historically low. Although I don’t foresee any changes in terms of interest rates in the near future (more on that later), the fact that an innocent 0.5 - 1.0% bump in rates could force foreclosures and defaults on loans is scary.

There are a couple of reasons for this continued push to purchase real estate. The main reason being that the majority of millennials’ parents have built their wealth through their primary residence. For example, my parents bought their modest split-level home in a suburb of Vancouver in the mid-’90s for $165,000. That same house is now valued at nearly $1.15 million resulting in a 700% gain (technically even higher because leverage was at play). Now, will this same house be worth $8 million in 2045? I highly doubt it. The reality is, the millennial generation will not see the same appreciation in their homes as their parents did.

Personally, I think there are better ways to deploy capital to see ample returns without the risk and associated costs that come along with real estate. Debt has become common ground. Buy a car? Borrow. Want that new couch? Finance it. Want a $3,000 stationary bike? Interest-free payments for three years! This will eventually cause major economic implications. I don’t see it coming in 2021 because Trudeau will continue the influx of money and keep rates low. However, it will come, and when it does every Canadian should ensure they are liquid and not levered-up.

2. Price of Gold Reaches $2,500

Gold is the most beloved and hated commodity. It has made many people rich and many people poor. It is volatile, to say the least. However, Gold companies are where I am investing a large portion of my money in 2021. As mentioned above, the Government of Canada (and the US) will continue printing money. They will continue to keep rates historically low. This point is almost guaranteed. Increasing interest rates would completely bankrupt the country at this point. Historically, low-interest rates have caused investors to seek Gold as a safe haven for their funds. This is especially true during times of volatility, as Governments provide massive stimulus to support the economy. Look at the chart below (2008 - 2012) when interest rates plummeted after the Great Recession. As you can see, Gold increased from roughly $900/oz. to hitting its peak around $1,850/oz. Over a 100% gain. However, this peak wasn’t witnessed until two years after the initial economic collapse. Following this historical trend would result in Gold having plenty of room to run in 2021 and beyond.

The following chart is from 2020. There has been a sharp spike in Gold prices since March and has tapered off in late 2020, however, similar to a decade ago, I don’t think Gold will reach its peak for another year, at the least.

In conclusion, in times of economic instability and government stimulus, Gold tends to rise. Some analysts believe that Gold has reached its peak. However, I am in the camp that Gold is nowhere close.

Prediction: Gold will reach $2,500 by December 31, 2021.

Two Companies I am bullish on:

• Fury Gold (https://furygoldmines.com/)

Equinox Gold (https://www.equinoxgold.com/)

3. Back to Urbanization

The pandemic saw a mass exodus from major cities. As remote work increased, people fled the cities for larger homes, yards, and more variety as downtown cores became something out of an apocalyptic movie. I think this will be short-lived. There is a reason people have been flooding to cities over the past few decades. They crave the community and vibrant culture a city has. I give it one dark winter where people begin to realize the solitude is not what they were in search of, and the loneliness begins to wear. This, in conjunction with falling condo prices, will fuel a resurgence of young families back to the city.

Couple this with the fact that companies will begin putting their workforce back to the office (much to the chagrin of employees). The mass amounts of real estate owned by major players will not remain vacant. The long-standing leases that many organizations endure are not going anywhere, and organizations will want to utilize this excess capacity. As this unwinds, families will begin moving back closer to their places of work to reduce commute time.

Prediction: Condo prices regain momentum as people move back to the City.

4. Psychedelic psychotherapy continues momentum

In clinical research settings around the world, renewed investigations are taking place on the use of psychedelic substances for treating illnesses such as addiction, depression, anxiety, and post-traumatic stress disorder (PTSD). This is one of the most exciting developments over the past few years as there begins to be a reemergence and broader acceptance of psychedelics to help people with many illnesses. Although plant medicine has been around for millennia, it has been under government scrutiny for decades. The result of the termination of clinical research from the 1950s - 1970s resulted in these drugs being labeled as “drug abuse” with no medical value. This theory has been proved wrong countless times. Many studies have now proven the benefits that psychedelics offer. With public and private funding now rushing into space, I believe psychedelic companies will surge and regulations will continue to relax as more studies prove the beneficial use of these medicines. Mental health, alongside obesity, is the largest danger facing society. Therefore, I believe that continued research and funding in this field is vital for society moving forward.

What I see developing: Like any hot space, there will be “flashes in the pan”. Companies will raise money, IPO, and bust immediately. However, I do believe that there are many organizations who will continue fighting for the legalization of such medicines, and are in it for the long-game. One of these companies, a Vancouver-based organization, is Numinus Wellness. Mental healthcare in Canada is failing and Numinus is positioned to greatly impact the industry moving forward. They are in for the right reasons, are navigating the governmental regulations with top doctors, and are well-financed to continue research and refine their process.

Prediction: Hundreds of companies will go public in 2021 in the ‘Shroom’ space, but only a few will be long-term plays. My pick:

Numinus Wellness (https://numinus.ca/)

5. Lock-downs Persist through 2021

This will be an unpopular opinion. But, yes, I think that lockdowns will persist through 2021 and we won’t see ‘normal’ until early 2022 at best. The main reason I see for this is behavioural change and a disappointing roll-out of the vaccine. First, we have been conditioned to wear masks and socialize from a distance. Will you ever shake someone's hand again? Or will the elbow bump be forever?

Everything will be rolled out in phases. Slowly increasing bubbles, increasing office capacities, etc. However, I doubt anyone in Canada will attend a concert at the Commodore or take in a Canucks game this year. The ‘back to normal’ will be a slow and tedious process.

Secondly, the vaccine. I think many people believed that when the vaccine was developed it would instantly fight off the virus and we could continue as status quo. This has already proved wrong. The release is highly complex. The supply and demand issues, questions of who should get it first, and how effective it actually is are all major hurdles we face.

Prediction: Lockdowns persist through 2021.

Final Thoughts

As we continue to trudge through the pandemic storm and enter the New Year, there are a few key things to remember in order to navigate through life and/or business.

1. Accept the chaos. All the predictions above are volatile and to some, unpleasant, similar to much of 2020. However, a New Year will not change that. It’s just another day. You and your business need to accept and be proactive. Being proactive instead of reactive whilst taking ownership of the situation will position you for success.
2. There have actually been some amazing things coming out of the pandemic. Focus on those. Let’s not go back to the rat race. It doesn’t work. It has become clear that relationships are most important to people - focus on those. In your business circle and in your personal life.
3. Get outside. The pandemic forced outdoor socializing. Many walks (some aimless), hikes, and park gatherings. Continue this. There is no better medicine than being outside.

On that note, I hope everyone has a happy and healthy 2021!

Disclaimer: I am not a legal investment advisor and this is not ‘investment advice’. I am personally invested in all companies mentioned above. Please consult with your investment advisor before purchasing any investment.