Winter 2026
Dear Friends,
They make a nice couple, don't they, Canada's PM Mark Carney and Mexico's President Claudia Sheinbaum. They are smiling bravely, given that our two countries -- as Pierre Trudeau so delicately put it -- are "sleeping with the elephant". When that elephant is agitated , as it has been since the second coming of the Orange Bloviator, either of us can be crushed.
Both Canada and Mexico are fortunate to have such steady hands guiding the ship of state during these perilous times. It remains to be seen, however, whether their administrations will be able to successfully renegotiate the three-way free trade agreement (CUSMA) we have with the US that is up for renewal this year. Both leaders are projecting optimism, but at the same time working feverishly on Plan B's.
As PM Carney has wisely and repeatedly said: the old order of global trade anchored by the U.S. "is dead". Canada must seek out new alliances and partners. The elephant will never go away, but we must learn to stand more on our own two feet, to be less dependent on the behemoth. Canadians understand this.
In this context it is encouraging that Canada and Mexico last September signed a Comprehensive Strategic Partnership framework agreement and a Canada Mexico Action Plan. Each has much to gain from strengthening bilateral relations. Afterall, we are natural western hemisphere neighbours, albeit separated by an inconvenient elephant.
As most of you know, by a strange twist of fate, I personally in the last couple of years have found myself in the position of making connections in, and getting to know, Mexico. In my own small way, I hope I am contributing to building new bridges between our nations and cultures. With that in mind, I thought it might be of interest to share a few observations with you from the experience of a Canuck who has "gone native" (part of each year) in Mexico. I don't hang out with ex-pats and with the exception of business calls, speak only Spanish all day long. My base is in Mexico City.
Off the bat, you might ask: "Chris, where did the Spanish come from?" The answer is a surprise to me. It turns out that old dogs can indeed learn new tricks. All you need is a passion to learn, an excellent teacher and a romantic partner who only speaks Spanish with you. Next question. (Ps. Please message me if you'd like to be connected with my profesora. She gives classes in her home in Kingston and remotely. You're on your own for the romantic partner.)
While Mexico and Canada are both democracies, how that form of government is expressed in Mexico can be quite different, compared to what we are used to here. Mexico has a long history of the pendulum swinging between revolutionary liberators of the people, and autocratic rulers who restore the privileges of the land and capital owning classes. In terms of distribution of the wealth, Canada is a much more democratic society.
Claudia Sheinbaum, as leader of the Morena (literally, "dark-skinned") Party, represents (along with her immediate predecessor Andrés Manuel López Obrador) a swing of the pendulum back to the left. By increasing the minimum wage dramatically, accompanied by numerous social benefits programs, Morena has lifted tens of millions of Mexicans out of abject poverty. The party is wildly popular in consequence. Sheinbaum has something like a 90% approval rating.
Mexico is not shy about interfering with free markets. State-owned Pemex, the major player in the petroleum sector, is a prime example, with predictably unhappy results. Both the left and the right are known for running deficits, but Morena is perhaps trying even harder. In consequence, even though GDP is still growing and unemployment is remarkably low (around 2.7%), inflation is dangerously high. The knock-on effect is high interest rates on mortgages, car loans, credit cards and most crucially, government debt. If I were to consider taking out a mortgage on a property in Mexico City, I'd be looking at an interest rate of say 12%.
Despite being a social justice movement "of the people", the Morena regime can appear much more autocratic than we are used to in Canada. Five days a week, starting at 7:00 AM, Sheinbaum holds a "mañanera" (early bird) press conference. It lasts two hours and media access is strictly controlled. Sheinbaum decides who to take questions from. With the mañanera ritual, Morena to a surprising degree determines the news cycle for the next 24 hours. Virtually all the media, print and broadcast, parrot the talking points of the mañanera. It is an extremely effective propaganda machine.
Canal Once, the public broadcaster equivalent of the CBC, has seen its senior management gutted under Morena and replaced with political hires. To my delight, though, Mexico still has a seemingly thriving print newspaper industry. When I take my daily stroll to the news vendor on Avenida Insurgentes, I have my choice of ten or so publications. For a total of 25 pesos (roughly two dollars), I pick up copies of the left of centre La Jornada and the right of center Millenio. They both make for lively reading (up to a point, considering the influence of the mañanera ). Millenio's pundits, as one would expect, are more consistently questioning and/or scathing of Morena in their opining.
Business coverage is particularly good in Millenio, including content from WSJ and the Financial Times, and refreshingly, both papers devote more pages to arts and culture than we see in Canada. There is a singularity in the Mexican papers, however, that is quite shocking to the Canadian eye: acres of government ads plugging the marvels and benefits of Morena programs! A dozen or more full-page and half-page ads/propaganda in a single issue. Not just for a day. Day after day. Another tool in the government toolbox to control the news agenda.
The scale and the splendour of public art in Mexico are stunning. Here is some of the central detail from a spectacular Diego Rivera
mural in Mexico City's Palacio de Bellas Artes. It's title is Man the Controller of the Universe. It was originally commissioned by John D. Rockefeller Jr., of Standard Oil fame and fortune, to adorn the lobby of his newly built Rockefeller Center in New York City. However, when John D. saw the still unfinished work and realized he would be giving wall space to Lenin (depicted on the right), he and Rivera had a falling out and the commission was never completed. Rivera was a committed communist (of the anti-Stalin, Trotskyite school) and Rockefeller would have known this. Perhaps he could have overlooked Lenin, but not Trotsky, Marx and Engels, ten feet or so to the right of Lenin. Then there was his own likeness swilling a glass of champagne between the two propeller blades to the left. Rockefeller was a notorious teetotaler.
It would be fair to say that in this work, and in countless other examples throughout Mexico City and beyond, Rivera laid on his pro-worker, anti-capitalist feelings with a trowel, as did his great compatriots, Orozco and Siqueiros. To a Canadian sensibility it is rather remarkable that the Mexicans are so sanguine about mocking the capitalist hand that feeds them. President Claudia Sheinbaum's official residence in Mexico City's Palacio Nacional is no exception. Karl Marx has pride of place overlooking centuries of Mexican history as gloriously brought forth by Rivera. It is hard to imagine something equivalent in Ottawa. The closest we might come to it would be if the Canadian government were to commission Kent Monkman to paint his vast Miss Chief Testicle revisionist historical tableaux on all the corridor walls of Parliament's Centre Block building. That seems a stretch. And it's only a starting thought.
To conclude: we need to remind ourselves that these murals were commissioned in the the 20s through the 40s, following the Mexican Revolution. The vast majority of the population had not been well served by crony capitalism, far from it. Sadly, that is still true for tens of millions of Mexicans. Rivera and his artist compadres, through the medium of great art, taught essential lessons about Mexico's proud but difficult past, the ongoing struggles of the present, and the promised land of the future. Those lessons still resonate today.
Here is one more Rivera masterpiece from the 20s, poking fun at two generations of the Rockefeller clan this time, along with Henry Ford and J.P. Morgan. It is titled The Capitalist Dinner and is in stark contrast to a nearby panel that portrays a simple, Mexican communal supper titled Our Daily Bread. Both are part of a massive mural installation conceived and executed by Rivera for the stately colonial buildings of the Ministry of Public Education in the historic sector of Mexico City, an absolute must-see, if you have the chance.
Attitudes towards the stock market today in Mexico, if not as cynical as Rivera's, are nonetheless markedly different from those in Canada. Being in the business, I am curious about those differences. Here is some of what I have learned.
All Mexicans in the formal, tax-paying economy, are entitled to government pensions. As here, both the employer and the employee are obliged to pay into these programs. Also as here, these pensions, equivalent in some ways to CPP and OAS, are not nearly enough to retire on.
As here, Mexicans can supplement their minimum government pensions with various programs roughly analogous to our RRSPs and TFSAs. But that's where the similarity ends. The middle class and well-to-do Mexicans that I meet do not use these programs. More to the point: they generally do not save!
How then, do they expect to be able to retire? Good question. As far as I can surmise, there is a profound belief in two things: real estate and "familia". Everyone strives to own their own apartment or "casa". That makes sense. Secondly, there is an expectation that in old age one's children will pick up the slack as needed. That may make less sense in a country with rapidly falling birthrates.
As a result, the people I tend to meet, with rare exceptions, haven't a clue about the stock market. It might as well not exist. They wouldn't know where to begin to buy a stock. It's an alien concept. This is a problem that the government has identified. The roots to it are multifold.
Financial literacy, often considered to be unacceptably low in Canada, is woefully lacking in Mexico. The idea that it is possible to compound savings in the stock market at far better rates than parking cash in a bank, is virtually unknown.
So basic financial education would be part of the solution. But the government is not doing it. Logically the private sector should leap into the breach, but that could be easier said than done. As in Rivera's murals, there is deep-seated distrust of financial "advisors" in Mexico.
My read is that these barriers could be overcome with a long-term, strategic commitment from a well-capitalized investment dealer. Every time I float this idea in conversations, there is immediate interest from potential savers and investors. They tell me they simply are not being offered this kind of option in the Mexican market. Backing up that perception, it is noteworthy that in a country of 130 million people, Mexico has only some 10,000 registered financial advisors. Canada, with a population of 41 million, has about 28,000 advisors. Nature abhors a vacuum. In the spirit of deepening bilateral relations between our two countries, let's hope that a Canadian wealth manager steps up to help fill this one.
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CLASS OF 2026 FIRST SEMESTER REPORT CARD Staying the course pays off swimmingly!
The Class of '26 rose 10.1% for the July 1st to December 31st period, staying neck and neck with the S&P 500's gain of 10.5%. It bested the Dow by 2% over the same stretch. The outlier was the TSX which advanced an eye-popping 18%, mostly attributable to stratospheric gains in the precious metals sector. As the Headmaster has said before: "That's a sandbox we don't choose to play in. Those sugar highs never last, and when they wear off, many long years can go by before they return."
Adds the Headmaster: "I would like to commend our Healthcare benchmates Johnson & Johnson and Amgen, the so-called defensives of the Class, for leading their peers with a sparkling average gain of 26.4% over the first six months. Info Tech were a close second at 22.9%.
In terms of individual performance, I feel bound to congratulate Alphabet (parent of Google et al.) on a stunning 77.6% advance. And our patrician financial Class member Royal Bank deserves special mention for a none-too-shabby pickup of 30.4%."
No Class losers suffered a 10% or more dip. The worst hit were Intact Financial Corp, -9.8%, John Deere, -8.4% and Disney, -8.3%. As always, it pays to be diversified.
Here, briefly, are the sector by sector Class results.
Financials - B Central bankers, with the exception of Teflon Carney, rarely are showered with praise during their tenures. With only two exceedingly blunt instruments, setting interest rates and operating the spiggots that control the creation of money, we expect them to steer us skillfully away from the miseries of recession and inflation.
In the words of the Headmaster: "Let's give a tip of the hat to oft-maligned Bank of Canada Governor Tiff Macklem and his US Fed Governor counterpart Jerome Powell. Coming out of the pandemic collapse, they have artfully threaded the needle. To the surprise of many, our economies are still growing and inflation has largely been tamed.
Our Financial Classmates in particular are direct beneficiaries. When the economy is growing, credit and investment flows more freely and defaults on loans are not a drag on earnings. That was clearly the pattern for BlackRock, the world's largest asset manager, RBC, Intact Financial (property and casualty insurance) and Brookfield Asset Management over the past six months. Don't be fooled by their modest average market rise of 4.4%. All are thriving."
Resources - B Nutrien, with the world's largest reserves of the essential crop nutrient potash, advanced handily over the semester, up 6.7%. Adds the Headmaster: "Potash is so essential that it has largely dodged the Bloviator's tariff bullets. The U.S. simply can't produce enough on their own. They don't have the precious reserves that we do."
Retail - B Class veterans Alimentation Couche-Tard and Metro, despite predictably steady sales and earnings growth, saw their stock prices stuck on pause over the past couple of quarters. They advanced an average 1.6%. Comments the Headmaster: "I am not concerned. In both cases, the valuations were getting a bit rich. This is just a normal phase, building a new base before the next leg up."
Industry - B minus Class stalwarts John Deere, CCL and CNR appreciated an average -1.2%. Looked at individually, Deere was the laggard of the trio with a drop of 8.4%. This has to be looked at in the context of the highly cyclical agricultural world where farm equipment dealers are still working down excess tractor and related equipment inventories. The rebound is expected later this year and continuing into 2027.
CCL, the Canadian label and packaging company that operates around the world, conversely picked up a gain of 9.2% on the back of more than healthy increases in revenues and earnings. "And there is more to come," adds the Headmaster.
CNR was essentially flat over the semester. Comments the Headmaster: "CNR's been in a funk, underperforming its North American Class I railroad rivals for the past couple of years. CEO Tracy Robinson has made a lot of good moves to cut costs and improve efficiencies, but it's show me time. No more excuses!"
Healthcare - A plus From the Headmaster again: "Sometimes the hardest thing in investing is perversely the easiest. Do nothing and wait. If you have chosen well, good things will happen. Johnson & Johnson joined the Class in 2010 and from then until now we have seen its stock advance at a compound annual growth rate of 8.7%. If you include reinvested dividends, the return was 12.1%. Annually. Although Amgen joined the Class in 2016, its return rates are almost identical. Patient stocks like these are the essential yin component of a well-balanced portfolio."
Info Tech - A plus More from the Headmaster on his Confucian thought: "And then there's the yang, the dazzling pyrotechnical performers on the high wire who grab all our attention. Classmates Apple, Microsoft, Alphabet and Taiwan SemiConductor were all in the Artificial Intelligence (AI) spotlight this semester and didn't slip. Nor did their more utility-like benchmates Visa and Salesforce. Collectively they posted an average gain of 22.9%. Yin and yang. We need them both."
Entertainment - C plus Headmaster: "If Donald Duck were around, he'd be blowing a gasket over Disney's ongoing stock market woes ... five years and counting of Zippity Doo Dah nuttin, and -8.3% in the latest semester!!! I sympathize hugely.
Why do I hang on? Because sometimes the market gets it wrong. To wit: in the past five years Disney revenues are up 40.2%; earnings per share are up 628%; long term debt is down 26.7%; and return on equity has risen from a moribund 2.4% to a live and kicking 11.8%.
A rational observer could easily conclude that a great company with one-of-a-kind assets selling at a discount is an obvious buying opportunity. But the market is not always rational. Patience, dear Donald. Patience."
Donald Duck: "And if that doesn't work, Headmaster, we give Disney the Bee Oh Oh Tee! Good riddance!!!"
Infrastructure - C plus Brookfield Infrastructure saw its stock price sag 4.6% over the semester. But this was belied by this Class member's fundamentals. In the words of the Headmaster: "Brookfield's Data division is on fire, up 62% in the latest quarter. That drove overall funds from operations performance up 9%. And the icing on the cake? The company just signed a $5 billion framework agreement with Bloom Energy to develop power for AI data centres.
While we wait for the market to catch up to Brookfield's burgeoning order book, we can take solace in its unit distributions, currently yielding a snappy 5%"
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If you would like further information on any of the investing ideas raised in this issue, or a complimentary consultation, please call or email.
CW