The UK's Lost Trusst in its Leader
Host: Peter Haynes, Managing Director and Head of Index and Market Structure Research, TD Securities
Guest: Frank McKenna, Deputy Chair, TD Securities
In Episode 32, Frank addresses the rhetoric from Alberta's new Premier Danielle Smith who he believes will need to tone down the message in order to be electable next May. The theme of inflation is prevalent, with Frank touching on rising mortgage rates, OPEC's politically motivated decision to cut production and its impact on U.S. mid-terms and the mess caused by U.K. Prime Minister Truss' hugely inflationary and now unwound mini-budget. Frank admits that Russia-Ukraine is at a stalemate with no runway for an off ramp, as they head into winter. Despite all the negative press, Frank talks about his positive outlook on the world as whole, acting as a reminder to take a step back when we are overwhelmed by an endless stream of negative news headlines.
FRANK MCKENNA: I would say she's damaged goods and she's in a lot of trouble and she's in a lot of trouble within her own party, particularly all of the people that supported her. She's now walked away from the agenda that they voted for.
PETER HAYNES: Welcome to Episode 32 of our monthly TD Securities podcast on Geopolitics. I'm your host, Peter Haynes. And as always, we have the Honorable Frank McKenna to tell us all about what's going on in this world. Just before we got on the air here, Frank was telling me of a conversation he had had with one of the geopolitical leaders in Canada, and he felt pretty down at the end of it. But we're going to not be completely down in this discussion here today. We're going to find some positives in all of those negative headlines that everybody's reading. So today, the title of episode 32 is entitled The UK Has Lost Trust in Its Leader, and certainly we want to dive in on some of the issues around the UK and Europe. But before we get started, I want to remind our listeners that this TD Securities podcast is for informational purposes. Standard disclaimer: views described in today's podcast, they're not... They're pranks and they're Peter's, they're not TD's necessarily or subsidiaries. And these views should not be relied upon as investment, tax or other advice. Well, Frank, populism continues to be an important topic when it comes to politics. And here in Canada, the populist leaders continue to be winning. We had Poilièvre win the conservative leadership and now more recently, we had Danielle Smith win the leadership race for the United Conservative Party in Alberta after Premier Jason Kenney stepped down. What's the 411 on the new Alberta premier Smith? And what do you make of her proposed Sovereignty Act, which reportedly would defend Alberta against any federal rules that are not in the best interests of Alberta?
FRANK MCKENNA: Well, to start with, the populism is just a fairly normal swing of the pendulum. I think this, too, shall pass. But at the present time, we do have a premier of Alberta who ended up winning by going an unconventional route. And so let's just unpack that for a little bit. To start with, Alberta's a really complicated province and very, very difficult to govern. Jason Kenney, I think, is one of the most skillful politicians in the country, very high energy. And he was unable to completely contain the divisions within Alberta. So that speaks to how difficult it is. Remember, Alberta is an increasingly cosmopolitan province. We sometimes think of it in terms of ranchland and oil wells, but 325 different languages spoken in Alberta. And there's a huge difference in ideology between the rural areas and the urban areas. So it makes it very difficult. So then we get into a leadership campaign and leaderships, as we know, increasingly are really characterized by which part of the party has energy. And it's usually the more extreme parts of a party that have energy. In this case, the case of the United Conservative Party, the highly energized party, more extreme, more right wing and Danielle Smith campaigned going down that lane. And she was successful against some formidable candidates in winning. So she really ended up with a mandate that's much more right wing in Alberta than we're used to. It's also much more right wing than the province as a whole. And like leaders everywhere, at some point she will have to pivot as adroitly as she can towards the center of the spectrum. We're already seeing some signs of wear and tear on her. After a week in office, she's been forced to really apologize for making the rather bold statement that unvaccinated people were probably the most discriminated people ever. She's had to pull back from that. She's squirming on some comments she made about Ukraine, assuring less than fulsome support for Ukrainians in their struggle. So she's pulling back from some of those positions. And most importantly of all, her campaign chairperson, Rob Anderson, just within the last week has indicated that the so-called Sovereignty Act would have to respect Supreme Court of Canada decisions. And so that's a major statement that represents in many ways, some pull back as well. So my prediction would be that she will continue to fight to control those causes that she espoused during the leadership race, but that she will pivot a bit towards the center. The federal government, by the way, in my view, has left a bit of a vacuum in B.C., in Alberta and Saskatchewan, for that matter, which I think they should fill. They leave the impression that the rest of Canada doesn't care about the issues there. And I think some time should be spent by the government of Canada, reminding the people of the West that they've actually banked, they're bankrolling the Trans Mountain pipeline. It's subject to great controversy and probably over $20 billion of money from Canadians. They've put a lot of money into orphan well remediation out West. They've created a hydrogen policy that really caters to the natural gas industry in western Canada by recognizing explicitly and implicitly blue hydrogen. They have created a tax concession and probably going to be introducing even more fulsome credits for carbon capture and storage in the billions of dollars that will create a huge amount of investment in the West and help get onside on climate change. They've created a policy environment for LNG to take place on the West Coast, which will help take a lot of natural gas out of the gas basin and improve prices at the margin that supported coastal gas in their expansion plans to get gas to the West Coast. And even though it's run a cropper with U.S. federal policy, they have supported the Keystone XL. So at some point the government of Canada has got to stand up and say, look, you've not been ignored. We, in fact, done a great deal for the West. Let's work together.
PETER HAYNES: So, Frank, you often talk about being elected as a leader for a party versus being electable within a province or a country. And the question I have for you, there was a Léger poll done last week that indicated that former premier Rachel Notley, who's still very relevant in the province of Alberta, and she leads the NDP party, she's slightly ahead of the UCP, but at the end of the day, the electability of the leader is going to be what determines who wins the next election. Do you think that some of these early missteps will actually impact Smith when they have the provincial election in, I believe, seven months?
FRANK MCKENNA: I know both of these leaders reasonably well. I have some considerable admiration for their political skills. I think that in the case of Daniel, she will need to be able to appeal to a broader base of Albertans to be successful. And she's politically savvy enough to know that. In the case of Rachel Notley, she's got to run her party in many ways. People like her, they feel more threatened by the NDP party in that province. And so she's got to really find a way that the ballot issue becomes more around her than around her party. So I think at this stage, it's just too early to tell. A lot of the issues will come and go between now and the next election, but it's a good news day. So let's look at the good news. The good news is that Albertans have the choice between two very formidable women to be their premier for the next four years.
PETER HAYNES: While there's another very formidable female politician based in the... Former politician based in the province of Alberta, the honorable Rona Ambrose, who we're now fortunate enough to have as colleagues. I have Rona speaking at our conference on November 3rd, and I'm sure certainly we'll be getting the deep dive on her views between Notley and Smith and some of the rhetoric in the province. But let me ask you, Frank, if you were me interviewing Rona, what question would you have for her?
FRANK MCKENNA: Every day that I listen to Rona, speak with her, or hear her I'm more and more impressed. She is just absolutely first rate and we're very, very lucky to have her at TD advising our clients and managing relationships. She's absolutely terrific. I would not ask you the question of why she isn't running to become Prime Minister of Canada. I think she gets that far too much. I would ask her about how Alberta can be brought together again. This is a tremendous province. It's a huge contributor to the Canadian economy. And there is a political divide there. My good friend Jim Prentice ended up falling on a sword in Alberta. We've seen Kenney go down as a formidable politician. I think it would be a good question to her to ask her how she feels the divide in Alberta can be bridged.
PETER HAYNES: Well, it's interesting because there's certainly some local press discussing the fact that Smith seems to be catering to rural Alberta and leaving the cities behind. And that's creating a bit of a divide within that province. Reminds me a bit of Pennsylvania in the sense of it being very a state where it's very democratic in the urban centers and very Republican in the rural part of the of the state. But, Frank, I've got to admit here, I'm not a traditional banker. You're not a traditional banker. You joined the bank after a career in public life. But I have to admit, Frank, I failed in banker 101 here, and that is a fundamental lack of understanding of how mortgages work. I just assumed that the amount of payment on a floating rate mortgage just floated with changes to short term interest rates. But of course, dummy me didn't realize that the payments don't change. Instead, the floating rate impacts the percentage the principal is paid down with each payment. In all seriousness, with a significant back up in rates, we're approaching what are so-called trigger points where mortgage holders have payments that are no longer large enough to cover the interest only and will therefore start to eat into equity which which can only go on for so long before banks start to ask for more equity or potentially foreclose. U.S. hedge funds have forever played the theme that Canada would suffer a housing crisis. With the inflation outlook not being tamed any time soon, I think we can all agree on that, do you worry about ballooning mortgage payments and balances owing as perhaps a trigger event for a housing crisis in Canada?
FRANK MCKENNA: I think there is some silver lining in this cloud that we need to talk about. Peter. I think it was Mark Twain who said words to the effect of reports of my death have been greatly exaggerated. The death of the Canadian housing market has been predicted for some 20 years now, and it hasn't happened. Will there be strains? There's absolutely no doubt. And you correctly pointed out that there is a trigger point and that is going to be a challenge. But I just want to give you the other side of it, because I think it's quite compelling a narrative. To start with, first say that policymakers in Canada have always worried about variable rate mortgages and what would happen if interest rates rise precipitously. And as a result of that they introduced a qualifying rate. In order to be able to get a variable rate mortgage, you have to meet a qualifying rate, which is a five year fixed rate, which would be much higher than the spot market, so to speak. So in other words, there's some cushion already built in. Secondly, in Canada, like the United States, we don't have tax deductibility of mortgage payments. And that's because the United States, when they had their housing meltdown, really, it was because properties were mortgaged right up to the gills. That's not the case in Canada because the policy imperatives are different. Thirdly, we've got a pretty healthy loan to value ratio in Canada, I think good underwriting by the banks and we've got mortgage insurance and high ratio mortgages. And then maybe most importantly of all, when we've looked at this over the years, we always come to the conclusion there are two major triggers that would precipitate a total collapse in the housing market. One of those would be excessively high mortgages. High interest rates, I'm sorry, going up precipitously. And we have some of that present now and and that will continue. But the second trigger is high unemployment, and that is the inability of people to find a job, keep a job, and make their mortgage payments and throw the keys in the middle of the room, so to speak. That's not the case now and it's not forecast to be the case. In fact, the forecast is that we may end up having a downturn in the economy, but without the concomitant increase in unemployment. In fact, right now, what we need are more workers. We have a lot more jobs than we have workers. So that trigger point is not present in this market at this time.
PETER HAYNES: So if you're a betting man based on what you just said, it sounds to me like you think we're going to avoid that that evil, high interest rate, high inflation, so-called stagflation world.
FRANK MCKENNA: I think that we're going to avoid a collapse in the housing market and as a result of the factors that I've just said.
PETER HAYNES: Okay, so let's follow on with the theme of inflation. The decision by OPEC to reduce production hits consumers and particularly consumers in the United States right in the pocketbook as it triggers a hike in gas prices. This decision by OPEC to reduce production, which was announced a couple of weeks ago, seems perfectly timed to disrupt the very positive momentum of the Democratic Party was feeling ahead of midterms. The U.S. seems to think that Saudi Arabia was the lead horse behind the cut, but it would seem logical that Russian President Putin might have had his fingerprints on the cut, more so than any other leader of OPEC countries. Do you think there's nefarious intentions behind this rather unexpected decision by OPEC?
FRANK MCKENNA: I do. I mean, there's a selfish interest. Obviously, they want to keep the price up. The United States was asking them to forbear on the decision for a month or two, which would have taken it out of the political realm in the U.S. and they wouldn't do that. And so I think that's where politics comes in. Certainly for Russia, they're motivated to do that. They paying a high cost for this war. And by having high oil prices and continuing to sell into that market, they're able to fund their war effort. In the case of Saudi Arabia. They have some issues with the United States, which I think are very irritating to them. One would involve the United States effort, along with Europe, to try to get Iran back in the comprehensive nuclear treaty, which would turn on this. It gets them their oil. They're also opposed to the United States position on the war in Yemen. They're continuing efforts to try to end up getting Saudi Arabia to back off from that. And then thirdly, it's no secret that who's running saudi Arabia is very close to the Trump part of the political elite in the United States. Son in law of Trump, jared Kushner is very close with the Saudis. I would say the Saudis are much more comfortable with Republicans in the White House than Democrats in the White House. Trump visibly helped the crown prince after the Khashoggi assassination by embracing him at the next G20 and in fact, showed more friendship to him as president than he did to Canada, its closest ally and friend. So in many ways, I think the Saudi Arabians owe the Republicans quite a lot, are probably not going to do anything to help the Democrats in the midterms. So for all of those reasons, I think there is nefarious intent, intent behind the decision.
PETER HAYNES: So when we just look at midterms now, which are T-minus three weeks, I was in Washington last week and it was a ghost town. All of the House politicians and many senators, as you know, are on the stump in their local states and districts. So obviously, the most high profile race is for one of two Senate seats in Georgia. We've discussed this in the past, and it involves Herschel Walker and Reverend Warnock. It's been a back and forth mudslinger. I'm sure you're following it closely. And I have to give the edge to Warnock, because I don't think any of us knew that Herschel Walker had fathered two children out of wedlock and he had paid for an abortion after supporting a complete ban on the practice. So I think right now we'd have to lean towards Warnock or at the very least, people aren't going to vote at all because even if they're Republicans, they don't necessarily want to support the Democrats. They just won't vote. So definitely leaning Warnock there. But that's just one of many key races, Frank. How does Frank McKenna, the political prognosticator, see things playing out in midterms?
FRANK MCKENNA: Well, that race is particularly interesting because of the sheer hypocrisy of it all. The denial continues, even though it's pretty obvious now that Herschel Walker actually paid money to this woman and that she has a receipt for the abortion. The Republicans are supporting him completely, including all the evangelical Republicans who are the base of that party, because his vote is a really critical one in terms of winning back the Senate. Okay. So jumping right into it, in terms of handicapping it, I would handicap it as Republicans have the edge going into this election. Why? Number one, history. There's been a very long period of history where the midterms go against the incumbent. Secondly, you've got, in the case of the House, several other specific factors. One is the power of incumbency has been lost for the Democrats. They had a number of of their candidates who have decided not to run. It's much more difficult to beat an incumbent than a new person. So that gives an edge to Republicans. And Republicans control the majority of governorships. And the governorships are responsible for disgusting and wholesale gerrymandering of of the of the voting districts. And that gives an edge in the case of the Congress to Republicans as well. The other factor now, the Democrats are in a period where they look to be leading in terms of the generic vote. But Republicans are pouring a wall of money in. Democrats are actually raising more money, the candidates themselves in the Senate and in the House. But the PACs and super PACs with their Steve Schwartzman's of the world can get in and Koch brothers and so on. They're pouring hundreds of millions of dollars in and they're putting their finger on the scale on the Republican side. And it's starting to affect the results. And the Republicans have been able to frame this a little bit more on economic issues than on moral issues. And finally, Latinos have slipped away from the Democrats and they're providing less of a margin for Democrats. So for all those reasons, it's leaning Republican. I think the House is definitely going to go Republican, no doubt about it. The governorships will as well, although there may not be many won or lost, but the Republicans will continue to enjoy their advantage. The Senate is the one that's most interesting. It's a coin toss, really, literally 5050. The Republicans have made this one interesting by by introducing some really flawed candidates in bellwether seats. So that's been a problem. Trump's probably single handedly done more damage to the Republicans in the Senate race than any other factor. So I think it's going to come down to the two races. You mentioned Georgia. Georgia's going to be razor thin. And New Hampshire, I think you can put in the Democratic, call them now because of the candidate the Republicans nominated. Arizona, you're definitely going to have Mark Kelly return. Pennsylvania, which was a former Republican incumbent, I think that's going to be a borderline call. If the Republicans were to lose that, that would advantage the Democrats by one. On the other hand, the Democrats have a candidate in Nevada who's in trouble. And even though both states are very close, I think ultimately it'll come down to Nevada and Pennsylvania as to who controls the Senate and Ohio, Wisconsin in North Carolina. These, as always, represent glimmers of hope for the Democrats. The voting, the polling there is all within the margin of error. But normally when it comes to the actual results, Democrats lose those races. So I think it comes really down to probably those two states, Nevada and Pennsylvania, that will determine the outcome.
PETER HAYNES: Unbelievable. Given how powerful those decisions are, especially if both chambers go to the conservatives. The Republicans, I should say. So let's cross the ocean, Frank. And we titled this discussion the fact that the UK had lost trust in its leader, the UK's leader by the name of Liz Truss, has really gone from bad to worse in her leadership of the Conservative Party in the UK. Since we last spoke, Truss announced highly inflationary, huge unfunded tax cuts. She watched the pound move to near parity with the US dollar, which I believe was the first time ever. That's when the market was already worried about inflation. She's watched long end rates back up so much that the government had to step in and support the market to avoid the local pension funds from having solvency problems. She fired her finance minister. She unwound all of the earlier decisions, or at least the follow on finance minister, unwound all of the earlier decisions. They cut spending or announced cuts to spending on the military, which seemed to be quite contrary to what's going on in Russia. And now she faces a backbench revolt that threatens her ability to govern the country. In short, it's a complete mess in the UK. Does Liz Truss have any way out other than to hand over the reins to yet another party leader until the next general election in a couple of years?
FRANK MCKENNA: To use an expression, I think she's circling the drain. There's no doubt about that she's in a lot of trouble. Her approval rating is 9%. That's probably going to be exceeded by the rate of inflation at some point during this cycle. The bookies have put odds on as to what's going to go bad first, wilting lettuce or Liz Truss. So she's reached that within a short period of time she's really become an object of ridicule, very difficult for her to survive. On the other hand, the Tories are caught in a dilemma. They really don't have a process of getting rid of a leader within a year after that leader's been elected, unless they change the process. But there's absolutely no doubt she's not in good shape. The only thing that could save her is that it's a couple of years before the next election. As it stands now, the Tories are at least 30 points behind the Labor Party in terms of vote intentions, which is absolutely unprecedented. There would be a couple of years to try to bridge that gap and try to rehabilitate her image. But I would say she's damaged goods and she's in a lot of trouble and she's in a lot of trouble within her own party, particularly all of the people that supported her. She's now walked away from the agenda that they voted for. The other side of the spectrum within the Tory Party, which is quite divided, never voted for her in the first place. I'm just going to close this on one final point. We can talk about Liz Truss all we want. We can talk about Boris, the buffoon, all we want. But at the end of the day, all of the problems go back to Brexit and the United Kingdom can't outrun it. They can talk about it all they want. They can talk about how it's been good, how itt's been bad. But if you look at the stark facts, this has been an unmitigated disaster for the United Kingdom and all of the good which the pro-Brexit people forecast has not taken place. And then we have the backdrop of the war in Ukraine and pandemic and inflation, all of those superimposed on a flawed decision in the first place. And the end result is that it's very difficult to get the toothpaste back in the tube on this issue and that a king will not want to revisit it, but it's going to leave them somewhat permanently impaired in terms of trying to fashion the recovery which they need if they're going to be successful in the next several years.
PETER HAYNES: So do you think that ultimately she will, there'll be another party leadership race? I know you say it's virtually impossible to get rid of the, or to have there's not going to be an election for a couple of years. But you're saying that the rules in the UK even in the Conservative Party suggest that she has that nomination for at least one year. Is that a party rule? Is that what you're saying?
FRANK MCKENNA: Yeah, it's a party rule. That can be changed, can be changed by the party. And I think they're looking at options right now. Yeah, my view is that she probably is going to get replaced if the Conservative Party can window, let's say the next year trailing by 20 or 30 points and look like they're headed for a total wipeout, they will lash out out pretty desperately to try to find a way out of that dilemma. And that usually involves a new leader.
PETER HAYNES: Well, there's another leader that's desperate right now, and he's in Russia. It certainly appears that Putin, President Putin, is losing support in his own country with the recent decision to partially conscript Russian men with previous military experience. And he sent many of them off to active duty almost immediately in response to the destruction of the bridge that linked Russia to Crimea, which in fact Putin himself drove across in celebratory fashion when it was first built. The Russian president ordered a bombardment of Kiev and surrounding areas as his troops continue to lose ground in eastern Ukraine. Military experts believe that Russia used a significant percentage of its long range missiles and its supply of drones on this recent bombardment. With nuclear rhetoric ramping up again, it feels like Putin is being backed into a corner without an off ramp, and that seems very dangerous. Is there any light at the end of this very dark tunnel, Frank?
FRANK MCKENNA: I think the way you've described it is very accurate. This attack on the bridge is much more monumental, I think, than than we sometimes recognize. It's going to be, I think, as much as nine months before the bridge is repaired to allow heavy trucks and trains, which means that the supply routes into the Crimea are really cut off. And as I understand it, there's really a single rail network that would service the region at this stage. And the Ukrainians have shown themselves very adept at the kind of warfare that would take out that kind of transportation network. So I think it's a big problem for the Soviet Union and it's a big problem that they're losing on the battlefield and that their troops are demoralized and the Ukrainians are highly motivated. All of that's the case. But you've got a massive country with a massive military, and they're going to do everything they can to avoid the humiliation of defeat. And, of course, this rage that Putin exhibited this week, bombing civilian targets with drones and missiles is just one more indication that this is a war, more about saving Putin face than anything else at the present time. But they still have things they can do. We noticed this week that troops are massing in Belarus. Some 10,000 Russian soldiers have moved into Belarus. The Belarusians making ominous noises about getting involved in the fray. A lot of people think Lukashenko would be making a massive mistake if he were to do that, that he would lose a lot of support at home, that the Belarusians are fairly sympathetic to the Ukrainians. But he's getting a huge amount of pressure from Putin, and Belarus is a vassal state of Russia. So that could be a front that would open up, that would cause Ukrainians a lot of grief, taking out the energy infrastructure as we head into winter. That would create huge hardship for the Ukrainians. All of that leads to the conclusion that we seem to be in for longer rather than finding an offramp at the present time. I notice that Turkey is, Erdogan is going to be meeting with Putin, trying to explore opportunities for peace. Quite candidly, it is hard to see a peace now that Ukrainian, the Ukrainians are going to sign up for that would give up a lot of their territory. And hard for Putin to sign a peace treaty that would either give up the Donbass or the Crimea. So at this stage, it's hard to see the elements of a solution. One element, but it's not enough for a solution is Ukraine, ukraine's interest in joining NATO. I think that the rest of NATO's could probably put that in the freezer, if that were the only factor that would lead to some kind of a resolution here. But at this stage, that's probably not enough.
PETER HAYNES: So realistically, Frank, this this war might never end. I know that sounds a bit ridiculous, but we may be just in a situation where both sides are kind of standing their ground and maybe things will just, I don't know, it just feels like I don't see any off ramp. And it might be one of those situations where we're in a there just isn't a solution that will satisfy both parties.
FRANK MCKENNA: Well, currently they're stalemated on the battlefield, although the Ukraine has had a good run for the last couple of weeks or months. And we're getting into the mud season right now, up for the next couple of months, it'll be almost impossible to move on that battlefield. And then we get into the winter, the dead of winter, which is a little bit better for mobility, but hard on the troops. Canada, by the way, delivered 500,000 units of winter clothing, which some people may poo poo, but it actually could be a very significant advantage for the Ukrainians as we get into winter fighting. Right at the moment. It's hard to see how this is going to evolve from the current stalemate, although there are some ammunitions being moved into the Ukraine now. I think 18 more Hummers which are having a massive effect on the battlefield and more anti-missile surface to air missiles that will help protect the cities of Ukraine. Those are going to have consequences on the battlefield for sure. Do you know who the biggest provider of artillery is to the Ukrainian army?
PETER HAYNES: No.
FRANK MCKENNA: Russia. They've actually seized more artillery, tanks, howitzers, etc., from Russia, which they're using against Russia than other countries have provided to them.
PETER HAYNES: Just because they're walking away, the soldiers are walking away from their their equipment and they're becoming civilians when they're concerned, they put on civilian clothing and walk around like they're Ukrainian, right?
FRANK MCKENNA: Exactly.
PETER HAYNES: Wow. Well, look, Frank, on the past weekend with no Blue Jays games to watch, I reintroduced myself to my wife and we watched the biopic on Elvis, which was quite good, I might add. I didn't appreciate how controversial Elvis music was and his dance moves were back in the fifties, within the white population, especially in the South and in the Memphis area where he applied his trade. But the movie really highlighted a lot of the racial tension that existed in that era. And at one point, the leads in the movie mused about the current state of affairs being as bad as ever. And it kind of got me thinking with all the negative in the world, are we really worse off today than at any other point in modern history, or are we just overwhelmed with the amount of information that we have at our fingertips and we simply know too much?
FRANK MCKENNA: I'm really glad you asked that question. I get carried away with negativity, I guess, just because of my involvement in some issues. But I remember once I was preparing a graduation speech, I was premier and somebody put a quote in saying, kids today are at the very worst. They're intemperate, they're disrespectful. And went on and on and on and on. And I said, Why the hell am I putting this in? This seems like a Debbie Downer. And the person said, Look who said that it was Aristotle. So it just goes to show, you know, we get carried away in the moment. But the truth is, Peter, we need to think about this over and over and talk about over and over again. The world is actually a much better place. With each passing year, the world is a better place. And if you just looked at statistics now, child mortality rates have fallen in half since 1990. That's incredible. Our life expectancy has improved 20 years since 1950. In fact, since 1990, it's improved by six years alone. Can you imagine? That's not that long ago. And we've got six more years to live. In fact, just in the last several weeks life expectancy statistics came out again in Canada was was again up something like 82 years. The United States, for pretty ominous reasons, was down about two years. And sometime we should go into that in greater detail. But their life expectancy dropped all the way down to about 76 years. But overall in the world, life expectancy is up dramatically. If you had a child born this century, that child is going to live on average a hundred years. Extreme poverty is down, is probably cut in half. Hundreds of millions of people have been taken out of poverty. We've got a dramatic decline in deaths from various illnesses. Guinea worm has been eliminated. Malaria has been largely brought under control. And even cancer is seeing much improved results in almost every form of cancer through the modern therapies that we have. Homicide rates are down. Violent crimes are down. We've got more people in democracies than ever before in our history. Literacy rates now are approaching 100% in many countries in the world. Connectivity, the world is more connected than ever before. And many of the poorest countries in the world are using connectivity tools to create modern economies. So when you add it all up, we're in pretty good shape. We've got some very unfortunate geopolitical issues which I think are coming about as a result of a bit of a vacuum in leadership in some ways. If you look at the gross statistics, this world is in pretty good shape.
PETER HAYNES: Well, you mentioned democracies and I wanted to touch on. Iran as we finish up here. There was a recent uprising led by a young woman in the country that led by young women in the country that followed the death of a 22 year old Mahsa Amini who reportedly died three days after her arrest for not wearing her headscarf or hijab properly. I know that the government will claim that she died of a heart attack. Her family says she didn't have any history of heart illness. So there are certainly some questions around that. But the result was protests that broke out across the country with demands for more freedoms and involved schoolgirls, as well as men and teenage boys in support of the women demands. Well, it's hard to know exactly what's happening. It appears that the government is struggling to rein in these protesters. This is not the first time the Iranian government has been subjected to widespread protests. You know, we had the Green Movement in 2009, but historically these events have been limited to urban centers and they've been tamped down generally quite quickly. Perhaps you can blame social media, but Frank, do you think there is something going on in Iran that's bigger than perhaps just the individual event that occurred?
FRANK MCKENNA: Well, I think that freedom is an irrepressible force everywhere in the planet, and the advent of social media makes it even easier to organize. So those are all good trends. I cannot express confidence that things are going to change in Iran at this point in time. I'd say the Ayatollah and the mullahs have total control over the country. This is a disgraceful situation that we're seeing, the oppression that's taking place, the crackdown on human rights. But to some extent it's reasonably confined. She was a member of the Kurd community and the Kurds represent 10% of the Iranian population and they've historically been at loggerheads with the Iranian government. I mean, they really want their own nation. And so they're constantly at loggerheads with the Iranian government. So nothing is new there. But I would say that this has not yet spread where it would need to spread into the armed forces and the policing agencies and into the broader community in order to bring about regime change in that country. So as much as I would like to see Iran become a more positive contributor in the world, I am afraid I don't see the current situation leading to that result.
PETER HAYNES: Well, we'll continue to watch that part of the world carefully. There's always seems to be something flaring up and in that region. Frank, as I was listening to you talk about life expectancy, I wondered if those stats were taken before or after the Blue Jays blew the eight one lead a couple of weekends ago. Now, the truth of the matter is my personal wound has not scabbed over yet, so I want to take a month off from talking about the Blue Jays. Instead, let me stick to baseball and ask you, with the Dodgers and the Braves and the Blue Jays now out, who is your pick to win the World Series? And as we tape, there are five teams remaining because the Cleveland, New York Yankees game was rained out last night. And obviously that game will be played today. With those five teams remaining, who do you think wins the World Series?
FRANK MCKENNA: Yeah, so I just have to state categorically I'm still in mourning. I'm going through the seven stages of grief, I guess. And I just hate the idea that every single day and night goes by and I really don't have a team to look at to cheer for in baseball. But anyway, that's life, there are worse things in life. Look, I'm just going to take a flier here and pick Houston. Probably on paper I would have to say the Yankees. I still think that they're a formidable team and we'll know we'll know within hours, literally, whether they're going to be moving on. I just think Houston are battle hardened and have experience and that seems to matter quite a lot in these playoffs.
PETER HAYNES: Well, that would be great for their manager, Dusty Baker, who by all accounts is a great human being and hasn't won. And so that would be great for him. I'm going to pick Philadelphia and I can pick them because they're flawed in so many ways and it just seems to be one of those years. They play bad defense. They don't have a deep rotation. Their bullpen was a mess until late in the season. And for all those reasons, I'm going to pick them to win. And I know Philadelphia's on a bit of a heater right now with their football team off to a 6 and 0 start and their baseball team going to the NLCS. So I'm I'm excited for my friends in Philadelphia and I hope that they win, but it's going to be fun. I'm still watching more. Normally I give up on watching when my team loses, but I've been enamored by this year's playoffs.
FRANK MCKENNA: Good on you. I think they're a Cinderella team and I just love the fact that Bryce Harper is just kind of standing up and strapping the team on his back. It's wonderful when you see these people who are paid a lot of money actually play with pride and purpose.
PETER HAYNES: Yeah, I couldn't agree more because there's certainly some examples out there of superstars with the $300 million contracts who haven't done well in the playoffs. And and it certainly makes you wonder why all that money is being paid. Well, Frank, thanks for all your time, as always. And we'll chat again after mid-terms at the end of November. Look forward to speaking to you then.
FRANK MCKENNA: Okay. Thank you.
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Managing Director and Head of Index and Market Structure Research, TD Securities
Managing Director and Head of Index and Market Structure Research, TD Securities
Managing Director and Head of Index and Market Structure Research, TD Securities
Peter joined TD Securities in June 1995 and currently leads our Index and Market Structure research team. He also manages some key institutional relationships across the trading floor and hosts two podcast series: one on market structure and one on geopolitics. He started his career at the Toronto Stock Exchange in its index and derivatives marketing department before moving to Credit Lyonnais in Montreal. Peter is a member of S&P’s U.S., Canadian and Global Index Advisory Panels, and spent four years on the Ontario Securities Commission’s Market Structure Advisory Committee.
Deputy Chair, TD Securities
Deputy Chair, TD Securities
Deputy Chair, TD Securities
As Deputy Chair, Frank is focused on supporting TD Securities' continued global expansion. He has been an executive with TD Bank Group since 2006 and previously served as Premier of New Brunswick and as Canadian Ambassador to the United States.