There are things I really don’t get in life and one of those happened today. It was the Snapchat IPO, long anticipated in the annals of social media types everywhere. At the end of the day, shares had risen almost 50% from where they started the day, giving Snapchat a value of about $35 Billion. I’ll rest my case; the company has never made any money and doesn’t really do anything useful. It is what it is.
I have Snapchat and I’m bored with it. I do see how very young people can find it entertaining, but for guys like me compared to Twitter and even Instagram, it has no value. However, clearly, I don’t get it and that’s OK. I could use the $35 billion just like anybody. Somehow I have to come to grips with the fact, this is the new economy. Finding my way is difficult.
So be charitable with me as I take you back to what I think of as the real economy. Statistics Canada released new numbers on the Canadian economy last week, which said our Canadian economy grew 2.6% on an annualized rate based on performance in the fourth quarter of 2016. That is based on many things, other than Snapchat. Simply put, millions of wallets in the fourth quarter of 2016 were opened, which really helped.
Canadian GDP actually grew 1.4% over a year ago. However, business investment in nonresidential structures declined 10.7%, which was the second year in a row declines. This was attributed to the decline in the energy sector. Lets hope in 2017 and 2018 this is reversed. Building infrastructure is never a bad idea and we don’t want this trend to continue.
Of course as you know interest rates are still in the super low territory. It is increasingly expected that the US Federal Reserve will be raising interest rates in 2017. In fact the first interest rate increase could come this month. It is actually led lately to a slight increase in the value of the US dollar and a subsequent weakening in our loonie. It will surely have an impact on how the Bank of Canada will respond in the coming months.
There is not a lot of reason for the Bank of Canada to raise interest rates other than to follow the US Federal Reserve. There are even some that have felt the Bank of Canada will cut interest rates again. I cannot quite see that as I think we need to follow US interest rate hikes otherwise the Canadian dollar would fall sharply. At the end of the day, even though a lower dollar is good for Canadian farmers, too much of a mirage is not a good thing.
Of course, President Trump will be weighing in on this too. The American economy is doing well and Mr. Trump seems intent on doing even bigger things such as building the border wall as well as approving projects such as the Keystone XL pipeline. He is also signing executive orders cutting much regulation within the financial services industry as well as throughout the rest of the American government. We’ve got the Trump rally going on in the stock market. Who knew this bombastic celebrity from New York would be overlooking a bursting US economy in his first term?
Of course, this Great American economic wakening is much more than Snapchat and the Trump rally. For those of us involved in agriculture we want some improvement in our agricultural commodity prices. Yes, President Trump does make us nervous from time to time especially with him wagging his finger at Mexico. Mexico is responding by giving signals they don’t want American corn anymore. It’s just getting to be too much of a story and I wish it would just go away. Add a couple dollars on the futures of both corn and soybeans and most of us would be satisfied.
The problem is that American corn growers are facing ending stocks of approximately 2.4 billion bushels. The soybean ending stocks figure is closer to 420 million bushels. Then there is that Brazilian crop of soybeans which is coming out of the fields now. There is also much of the Safrina corn crop already planted in Brazil. The outlook for commodity prices isn’t that good.
Having said that, there is the whole northern hemisphere-growing season yet to begin. Like in past years, we will take our chances. There surely will be marketing opportunities ahead. We’ll take that growing non-farm economy, eventually that will help too. But Snapchat, I don’t know. Maybe someday, they might even make a profit.