Alberta headed for record deficit

[WilsonFourTwo]

Originally Posted by Resolute 14

The idiotic changes to the royalty program were not made at the mercy of the markets. Stelmach killed the oil patch before the recession even hit.

That's one side of the argument, for sure. Some (perhaps even many?) would argue that Alberta is giving away our resources like the town tramp gives up the coochie.

What it comes down to......would you rather get $100 over 10 years, or $200 over 30 years?

We face two problems right now. First, we're so heavily tied to O&G that any change is going to have a negative effect. Second, we STILL don't have a vision for what this province will look like after O&G. Tech? Manufacturing? Farming?

[bizaro86]

[QUOTE=WilsonFourTwo;2646661]That's one side of the argument, for sure. Some (perhaps even many?) would argue that Alberta is giving away our resources like the town tramp gives up the coochie.

What it comes down to......would you rather get $100 over 10 years, or $200 over 30 years?
[QUOTE]

I would much rather have $100 over 10 years. Put it in a fund now and invest it for the future. I don't care which fund, but put it in there and leave it there so we don't have to blow up the rest of our hospitals the next time O&G prices tank.

Michael

[IliketoPuck]

The Stelmach royalty review was a complete joke, and I honestly think Steady Ed should have been given his marching orders then and there.

The "expert" on the O&G industry that the royalty review panel consulted with was a guy who made his money in the .com boom, and who had next to no true knowledge of how the industry worked in Alberta. Yet the panel took his advice as verbatim and created the royalty system we have now.

Stelmach has also run a dictorship since being elected, where any dissent in the party leads to a swift ousting from the caucus, regardless of possible merit. Not being able to constructively criticize and build a stronger foundation as a result, leads to ineffective govenrment and has given the WRA an actual chance. I won't be voting conservative, but I can't in good conscience vote Liberal either, so that leaves WRA, and I think alot of Albertans might feel the same way. In any case, I think Stelmach has to go.

[Shazam]

Originally Posted by WilsonFourTwo

Who wants a guaranteed risk-less return? The time horizon of the fund is indefinite......risk is absolutely acceptable and should be encouraged. Norway's sovereign wealth fund is shackled by the "Do-Gooder" investment strategy and still grows by leaps and bounds.

Then people need to accept the potential for losses, and years where losses actually do happen. If the assertion is that the money MUST be available when deficits occur, and that principal cannot be taken out, then your options are very limited.

Since we're talking about Norway's fund.....started in 1990, now worth $440 Billion. Run a little differently than the Heritage fund (they actually put money in....), but it's an example of what can happen.

Their fund is quite risky. They had a very large return the past couple of years.

They also have a very large state-owned oil company. Do you think that's feasible here?

[IliketoPuck]

With regards to Norway, you are also talking about an entire country, not just a province.

Do you think that Alberta would be allowed by the rest of the have-not provinces in Canada to have a 400 billion dollar fund, while the rest of the country struggled to pay for social systems and infrastructure?

I think the number of hands reaching into Albertans pockets would only increase.

[Slava]

Originally Posted by IliketoPuck

With regards to Norway, you are also talking about an entire country, not just a province.

Do you think that Alberta would be allowed by the rest of the have-not provinces in Canada to have a 400 billion dollar fund, while the rest of the country struggled to pay for social systems and infrastructure?

I think the number of hands reaching into Albertans pockets would only increase.

That is a concern that I would be happy to have as compared to the susceptibility we face in the current boom and bust cycle.

[Shazam]

Originally Posted by IliketoPuck

With regards to Norway, you are also talking about an entire country, not just a province.

Do you think that Alberta would be allowed by the rest of the have-not provinces in Canada to have a 400 billion dollar fund, while the rest of the country struggled to pay for social systems and infrastructure?

I think the number of hands reaching into Albertans pockets would only increase.

Population-wise, Norway is just a bit larger than Alberta.

But with the $400b fund, we could have the Royal Albertan Army.

[WilsonFourTwo]

Originally Posted by Shazam

Then people need to accept the potential for losses, and years where losses actually do happen. If the assertion is that the money MUST be available when deficits occur, and that principal cannot be taken out, then your options are very limited.

Their fund is quite risky. They had a very large return the past couple of years.

They also have a very large state-owned oil company. Do you think that's feasible here?

Seriously.....I'm not sure if you're shining me on or not? Do you think I'm advocating putting Billions into penny stocks? If I can build a diversified portfolio (providing growth and income), I'm pretty sure AIMCo can handle it.

And to be perfectly honest, yes, I think Alberta should have a significant provincially owned resource company. Probably another discussion entirely though.

[Shazam]

Originally Posted by WilsonFourTwo

Seriously.....I'm not sure if you're shining me on or not? Do you think I'm advocating putting Billions into penny stocks? If I can build a diversified portfolio (providing growth and income), I'm pretty sure AIMCo can handle it.

1) Norway has such a large fund because they have many state-owned companies.

2) We need to work on your definition of risk.

And to be perfectly honest, yes, I think Alberta should have a significant provincially owned resource company. Probably another discussion entirely though.

This is political suicide.

We already have Petro-Canada. Look how that turned out.

[WilsonFourTwo]

Originally Posted by IliketoPuck

With regards to Norway, you are also talking about an entire country, not just a province.

Do you think that Alberta would be allowed by the rest of the have-not provinces in Canada to have a 400 billion dollar fund, while the rest of the country struggled to pay for social systems and infrastructure?

I think the number of hands reaching into Albertans pockets would only increase.

I think I've already acknowledged that there are differences in the circumstances. If that wasn't clear, let it be now. Norway is still a terrific example of what Alberta COULD do. I would even argue that Norway is a terrific example of what Premier Lougheed (and crew) EXPECTED Alberta to do.

As for the "Rest of Canada having hands in our pockets".......what exactly do you think happens now?

Let me rephrase what you just said, and see if it still makes sense. "Success isn't worth it, we'd have to share some of the proceeds....."

Dunno about the rest of y'all, I'd rather have 50% of a dollar than 100% of nothing.

[Slava]

Originally Posted by Shazam

1) Norway has such a large fund because they have many state-owned companies.

2) We need to work on your definition of risk.

This is political suicide.

We already have Petro-Canada. Look how that turned out.

I'd love to hear your definition of risk. You seem to be of the opinion that the funds would be invested in something 100% guaranteed. Its a bad starting point. Even if we need some of that money immediately we don't need all of it, so we can logically invest it in longer term projects and do better than 2%.

[WilsonFourTwo]

Originally Posted by Shazam

1) Norway has such a large fund because they have many state-owned companies.

2) We need to work on your definition of risk.

This is political suicide.

We already have Petro-Canada. Look how that turned out.

Holy crap.......ALBERTA IS NOT NORWAY. Norway is an example of what a sovereign fund can do if properly managed. It was offered to provide support to the suggestion that the Heritage Fund has not been managed properly for decades.

As for my "...definition of risk", whatever. That comment is about as foolish as Clinton needing a definition for "Is".

[IliketoPuck]

Dont' get me wrong, I was not in any way saying that having a large fund to rely on is a bad idea, or that I wouldn't want it. I absolutely think the thought process is a good one, and in the long run it would certainly allow Alberta to be a rock of consistency through both expansionary and recesionary times.

What I'm saying is that don't you think it likely that Alberta, if it was seen to have this enourmous fund would then become subject to increased Federal pressure to share the wealth? We already come under intense pressure to distribute our wealth to other provinces, and that pressure would only increase as a result.

50% of 100% is fine by me, it sure is better than nothing. But I am not the type of person to want to give handouts to other provinces when they aren't deserved. Hope that clarifies my thinking.

- Alberta having a large sustainable fund: very good
- Alberta not being overly affected by changes due in economic conditions: very good
- Alberta giving handouts to Canada: very bad

[Azure]

Originally Posted by Shazam

It's a lot harder than it looks. If you want a guaranteed risk-less return, then you're looking closer to a 2% return. So $250b.

They don't JUST invest in risk-less return options. Pretty sure they invest in a variety of different things. 10% return might be too much, but I still think we should build it up to the point where we can sustain deficits in a time of recession.

[Azure]

Originally Posted by IliketoPuck

With regards to Norway, you are also talking about an entire country, not just a province.

Do you think that Alberta would be allowed by the rest of the have-not provinces in Canada to have a 400 billion dollar fund, while the rest of the country struggled to pay for social systems and infrastructure?

I think the number of hands reaching into Albertans pockets would only increase.

Originally Posted by Slava

That is a concern that I would be happy to have as compared to the susceptibility we face in the current boom and bust cycle.

I agree with Slava.

Hell, a wealthier Heritage Fund could help generate our transfer payments as well.

How many of the have-not provinces don't manage their money correctly? How many don't make proper business decisions in regards to government policy? Alberta didn't JUST become attractive because we have a bunch of oil. A small business that operates outside of the O&G sector is more likely to want to operate in Alberta than a lot of other provinces in Canada because of numerous different incentives, notwithstanding the tax code.

[IliketoPuck]

We could always just buy a bunch of Berkshire Hathaway stock

[Azure]

Originally Posted by Shazam

Population-wise, Norway is just a bit larger than Alberta.

But with the $400b fund, we could have the Royal Albertan Army.

I'm not sure what the actual return of the Heritage Fund was over the past 30+ years, but if we take a modest 5% return, with $100 billion in the bank, which SHOULD have been VERY easily done considering how long the fund has been setup, we could easily generate $5 billion in returns every year without even collecting royalties.

In years of a boom, where we run a surplus every year despite our outrageous spending, we can just stick that money back into the Heritage Fund, and grow it by even more. In the 'bust' years, we can take the $5 billion, and use it for deficit spending, while at the SAME time making sure we manage the budget properly.

Management like that should easily sustain us for a long time.

[WilsonFourTwo]

Originally Posted by IliketoPuck

50% of 100% is fine by me, it sure is better than nothing. But I am not the type of person to want to give handouts to other provinces when they aren't deserved. Hope that clarifies my thinking.

Clear as crystal, for sure.

I think the key to the entire scenario is strong leadership/guardianship. While I believe the average Albertan would be willing to share the wealth (the resources belong, to some degree, to all Canadians), I feel that a strong leader has more tools at their disposal to protect the Province.

I would be amazed if something like the NEP could be implemented today without Alberta's cooperation, although I admit that's not my area of expertise.

[Azure]

Originally Posted by IliketoPuck

- Alberta giving handouts to Canada: very bad

I don't think it can be avoided either.

[IliketoPuck]

Originally Posted by Azure

I agree with Slava.

Hell, a wealthier Heritage Fund could help generate our transfer payments as well.

How many of the have-not provinces don't manage their money correctly? How many don't make proper business decisions in regards to government policy? Alberta didn't JUST become attractive because we have a bunch of oil. A small business that operates outside of the O&G sector is more likely to want to operate in Alberta than a lot of other provinces in Canada because of numerous different incentives, notwithstanding the tax code.

Absolutely. I'm not against having a large fund on which to draw, it is a great idea and is what the Heritage Fund was supposed to be when created.

I'm just fundamentally against hand outs, that's all. Even though I know they are a reality that can't be avoided.