Wednesday Night #1429

Montreal matters
Beryl has produced a Manifesto – “A Freer, Fairer, Richer Montreal” – in pamphlet form, which builds on his recent editorial in the Suburban and calls for a reduction in government spending and intervention. It is Beryl at his polemical best – most Wednesday Nighters do not always agree with him, but no-one will deny the brilliance and conviction of his arguments. He is also proud that his editorial on Julius Grey (see Invitation below) provoked a strong Gazette editorial Hampstead’s lawyer has right to back Harel in the same vein- almost unheard of).
The second most populous municipality in Canada, Montreal is big business and however well intentioned, successive generations of municipal government appear to have been incapable of running it as a business.  The beauty and vibrancy of Montreal seem to contrast with relatively high taxes and debt.  The current administration has demonstrated that it has a vision for the future of Montreal but appears to have provided very little explanation of the cost and debt to be repaid by future generations and the nature of the municipal hierarchy is not one that favours low operating cost.
The Bixi project has been very successful, the glitches arising mainly from one-way use (Plateau downhill to Old Montreal seems a popular route), the lack of parking space for Bixis at some spots and dearth of Bixis at others, have yet to be worked out. The construction of the bicycles has been excellent and the beauty of Montreal as a city becomes even more evident from the view of a cyclist than that of a motorist. This issue of helmets appears to have received much more attention than warranted but the cost of this excellent endeavor, like that of many municipal projects, appears to have been given too little consideration. For more see Adam Daifallah:  The revolution will be bixied

Warm congratulations were offered to Alex Weinstein for his just-announced 5-year merit appointment to the Standing Committee on Building Structures and Egress of the NRC’s Institute for Research in Construction. His presence added a much-needed builder’s expertise to the next topic.

Construction and maintenance
The three-metre long Victoria Bridge, completed in 1859, still carries heavy rail as well as automobile traffic while recently constructed overpasses crash to the ground and the Turcot Yard exchange keeps losing chunks of concrete.  Glass panels continue to drop and shatter from the Bibliothèque Nationale and a concrete panel kills a young woman dining in an outdoor restaurant on Peel Street.  Curtain wall construction, especially popular during the 1950s and 1960s (remember the John Hancock Tower in Boston with its ‘pop-out windows’  in the 1970s?), has now proven to be not as reliable as previously believed.  The Peel Street incident appears to have generated much interest but as yet, little if any action.  Although stories of falling concrete abound, the onus of responsibility falls on the architect following the event. – and if nobody dies, nobody checks.  The city acts only on complaints.  The risk increases as these buildings age and sooner or later, regular inspection and more timely regular obligatory maintenance will be required as well as a greater concern about responsibility.
[Bill Watson writes in the Financial Post : Given all the usual caveats about not pre-judging cases still under investigation and people being innocent until proven guilty, etc., etc., in the normal course of events, if part of your building falls off and does damage below, you are and should be solely responsible. Or, if you’ve contracted out the maintenance, then the maintainers are responsible and if the victims sue you, you should sue the maintenance company. But the frequency with which inspections are required by law doesn’t really enter into it. If it’s your building, it’s up to you to make sure it doesn’t kill people. Moral and economic codes from Adam Smith all the way back to Moses to Hammurabi insist on that, and rightly so.]

Although Silvio Berlusconi‘s recent (taped) escapade with a Lady of the Night has raised some eyebrows in the media, current thinking both abroad and at Wednesday Night does not view the profession of prostitution negatively as long as the practitioners have chosen it. What is worrisome is the number of young girls/women – and boys/men –  who are coerced, frequently existing in appalling conditions  with no hope of escape. Theirs is a very, very different existence from the higly paid, often glamorous life of the call girl/escort who has more money than the GDP of many rural towns in Quebec.  In an aside, it was mentioned that it is hard to understand the sanctimonious coverage of the Italian leader when François Mitterand’s wife and mistress, with respective offspring were all given pride of place at his funeral.

The economy
China, Japan, India and East Asia are currently enjoying a big economic boom.  China has been spending large amounts on infrastructure – to the benfit of all of Southeast Asia – and has enjoyed a very healthy economy with booming domestic consumer spending.  China is expected to spend two trillion dollars on tangibles – i.e., investing in commodities.  In context, however, China’s G.D.P. is relatively small as compared to that of the U.S. or European Union. Thus, some experts suggest that investors can best profit from the health of the Chinese economy by focusing on (companies in) countries like Japan which are exporters to China.
Leaked Bank of Canada reports are predicting four and a half percent growth next year. Some are doubtful that the Canadian consumer confidence will be restored to the level to bring this about. Nonetheless, the loonie has gone to over 91 cents with the perception that Canada is coming back. Growth must lead to increased interest rates nd inevitably inflation.    Today, the prudent investor is investing in the corporate bond market, but as interest rates rise as the U.S. inflates in order to escape from its current situation, bond prices will inevitably drop.  Predictions are always less reliable than retrospections, and unanticipated world events, especially in the Middle East, Korea, Iran, or even in the E.U., U.K., North America or elsewhere would most certainly be reflected in the financial markets on this continent.

Healthcare in Canada and the U.S.
There is far too much money going into the healthcare industry  rather than into actual patient care.
We in Canada enjoy a love-hate relationship with our health care system but most Canadians would not trade it for the organized chaos represented by the U.S. healthcare providers and insurers where young people in good health, especially those of means, have no problem but feel the effect of its faults as they grow older in failing health, or when they consider the cost of private health insurance.  Much of the money in the U.S. healthcare system is made by people and organizations other than physicians, insurance and pharmaceutical companies.  The large sums involved constitute a strong reason to maintain the status quo and to convince the population that it is in their best interest to do so.  President Obama has to use the power he has been given to counter the fears of “nationalization” on the part of the general population, fed by those who profit from the current system as well as those who oppose government intervention in any area.  In the minds of much of the population and certainly in the minds of those who profit from it, the sanctity of the current system approaches that of the right to bear arms. Meanwhile, the argument that reform will generate cost-savings is hard to prove and some members of his own party (the Blue Dog Democrats) are opposing elements of the reform. Following tonight’s speech, some wonder where the line is drawn between leadership on an issue and arrogance, while others argue that the size and weight of the opposition to reform is so great that the president must use every bit of political power and cunning to win this battle.

Continuing fallout from the Earl Jones story
As the economy deteriorates, there is a strong possibility that the Earl Jones story, which surfaces just as Vicent Lacroix of Norburg moves to a half-way house, will not be the only story of investment fraud and greed. While we have recently observed the Madoff story from a distance (although aware of some of the investors and the consequences for certain Canadian institutions of which they were benefactors), there was none of the proximity that we are experiencing with the Jones story. Everyone seems to be linked in some way to either one of the victims or the perpetrator; thus the tale becomes more poignant. There is little prospect that the investors will recover any of their money and no indication that help will be forthcoming from the government.
Were it not for the tragedy of lost life savings, the victims might be faulted for their belief that any individual is capable of performing financial miracles. Aside from the fact that as people grow older they may lose interest (or ability) in reading financial statements and following their investments,  it is virtually impossible for any individual to be expert in all fields of endeavor and therefore they must depend on individuals with expertise in  areas other than  their own.  So that expertise is frequently sought out and paid for. But how to find the professional? Often, it will be through the recommendation of a friend who appears to have a successful relationship with that expert whether doctor, lawyer, financial advisor — even a clergyman. Human nature dictates that it is rare that we then systematically investigate the expert so recommended, and are even less inclined to do so if the expert projects affluence and success, especially if s/he has a certain charm. Regulation is not the answer – financial education must be emphasized, starting with young students.
A Canada-wide security exchange regulator has been proposed, but Québec appears to be torn between recognition of that need and the fear of the erosion of provincial identity.  Of equal or perhaps greater importance is the need on the part of investors to receive and pay attention to regular reports from both their financial advisor and the custodian of the securities purportedly owned by the investor.[Editor’s note Another suggestion from Financial analyst Diane Urquhart is the creation of  a national ‘securities crime’ unit: ‘Only police can administer criminal code‘  to which Tony Deutsch responds  in his inimitable fashion “My concern with using any police force to deal with complex economic or political issues is that the Canadian experience on such matters is bad. You can now be a Mountie without being able to ride a horse, but the resources freed up by that modification in the curriculum did not seem to produce much economic and/or political sophistication. While … only the police can administer the criminal code, I would suggest that you add the need for competent specialists on the payroll of the appropriate police force.”]

Flying back across the North Atlantic permits the air traveler to view the incredible untouched surface of Canada’s North and stimulates thoughts about the vast resources that are still untapped. This in turn leads to investment strategies that favor Canadian resource companies. However, the question of Canada’s industrial policy, particularly with respect to the Arctic – or lack thereof – is troubling. A question for another evening.

T H E  I N V I T A T I O N

40 years since The Eagle [has] landed. One of those rare events that is so firmly imprinted that we (those of us old enough) remember the precise circumstances under which we heard the words – in our case, sitting on the tiny back deck of our house on Northcliffe, staring alternately at the luminous orb in the clear night sky and at a tiny portable black and white television that David had somehow jury-rigged and precariously balanced on the railing – and we thought we were living in a very high-tech household! A wee Fiona had been roused from sleep to join us– not that we expected her to recall the event, but so that years later she could say she had been a witness.
What a wonderful, hope-filled time it was – the dawning of a new era. Somehow, we believed that it truly was “one giant leap for mankind”; somehow, the human race was going to be instantly transformed into a more intelligent, generous-spirited and altogether nicer species.  Of course, there are still those who believe that the moon landing was faked – which would account for the lack of transformation of our nature.
The Globe & Mail reminds us of the key contribution of a group of Canadians to the Apollo Program  – noting that these talented individuals (one of whom designed the Eagle) – had just been laid off the cancelled Avro Arrow project (an uncomfortable reminder of the frequent theme of Wednesday Nights: Canada’s failure to follow through on good ideas).

The poignancy of the death of Walter Cronkite – probably the keenest fan of the space program – just days before the anniversary has not been overlooked in the many tributes to the “most trusted man in America” [Jack Shafer somewhat tongue-in-cheek: Why I Didn’t Trust Walter CronkiteOther reasons we shouldn’t have trusted Cronkite. He sailed. He was avuncular. He had a beer gut. He inspired John Waters to grow a moustache (I think!). And he was way too into the space program for a grown man.] In mourning his passing, we mourn the last of the great anchors who were newsmen above all, and looked the part, unlike today’s perfectly coiffed and couturiered (if that is a word) pale copies – or the many opinionated blowhards who pass for commentators. While he is mostly remembered for his long career as a newsman, (see this charming memoir) , there are also many references to his love of sailing and attachment to Annapolis, as well as the New England waters. We wish him Fair winds and following seas.

A propos media – Congratulations to Beryl Wajsman for the recent award from the Canadian Community Newspapers Association for his editorial in The Suburban on racism among the Montreal police. “Wajsman explores the issue at levels well beyond the street. It is a hard-hitting, thorough and courageous piece of work.” Bravo also for the editorial on Julius Grey this week “With Grey!”  (hard to read – we hate The Suburban’s virtual paper), which takes issue strongly with the attempt by Hampstead City Council to remove Julius as legal representative of the City because of his support for Louise Harel

As always, we have the economy on our mind. There’s an interesting item from Bloomberg on emerging markets: Phone companies are making a beeline for emerging markets to win mobile-money business. Operators such as Vodafone and MTN Group Ltd., Africa’s largest wireless company, are targeting about 1.7 billion people with no access to banks. Mobile-money in emerging markets could ring in $7.9 billion of sales for operators by 2012, says GSM Association, an industry group in London. “It’s hard to ignore the impact and potential of mobile as a conduit for developing financial services,” said Mark Beccue, an industry analyst at New York-based ABI Research. “It makes perfect sense to marry the two together.”
Otherwise, we will hold comment until everyone has absorbed Federal Reserve chairman Ben Bernanke’s vision for the future of the US economy which he sets out on Tuesday. He is expected to detail how quickly he believes the turn-around will begin and when he expects the deepest recession in 70 years to come to an end. [Update: Fed Chief Says Pace of Decline Seems to Have Slowed]

We are beholden to several Wednesday Nighters for topics of interest this week.

David Mitchell stirs the peak oil pot with a referral to The BP Statistical Review of World Energy showing that only 14 of the 54 oil producing nations in the world are still increasing their oil production, providing the data to underline that the era of cheap oil is definitively over.

Felix von Geyer takes issue with Margaret Wente’s view that Enviro-romanticism is hurting Africa pointing out that she doesn’t even refer to the Green Revolution’s success story, the pre-GMO IR8, let alone the environmental destruction caused by pesticides in the Philippines etc, just the yields and that environmentalists are stopping agricultural progress in Africa. Don’t mention dumping of subsidised rice, corruption, lack of water, the fact that TRIPS are the biggest inhibitor to GMO take-up, and she doesn’t mention the fact that in her criticism of organic farming that organic no-tillage requires about 1/4 of the energy that conventional farming requires without killing all the microbial life in the soil essential to biodiversity.

Parker Mitchell, co-founder of Engineers Without Borders has come up with a proposal we believe has merit: It’s worth the risk, Ottawa: Set up an agriculture innovation fund for Africa — 20 per cent of all money should be set aside for an agriculture innovation fund. This fund would be charged with identifying and investing in yield-increasing projects, which could include private-sector agriculture entrepreneurs. There would be no blanket solutions; agriculture is highly locally dependent, so each country’s issues would be different. This would be closer to a venture capital model of support and would likely not be conducive to some of the bureaucratic constraints that prevent people closest to the field from taking decisions, so it might require Canada to deliver our aid through a new entity. – And develop a successful model for other nations to follow?

Ron Robertson pointed us to Gordon Smith’s piece in the Globe & Mail (for which Stephen Harper blamed Michael Ignatieff) : Canada’s interest is the G20, not the G8 and Jeremy Kinsman’s on the CBC site Forget the G8, Canada should have bigger fish to fry, which underline our concern that the current government appears to have little foreign policy. Next year is an important international diplomacy year for the country. Not only will Canada play host to the G-whatever and most likely the NAFTA Summit (presuming the President of Mexico can obtain a visa), but in addition there will be a large number of heads of state showing up for the Winter Olympics and private meetings with the PM. We wish we felt more confident that the government of the day had a VISION and PLAN to guide these encounters and restore Canada’s role as an influential Middle Power.

Iran is never far from our thoughts these days and just as news coverage appears to be waning, there are new developments — the somewhat astonishing Rafsanjani sermon on Friday, followed by sizable demonstrations, and the call on Sunday by former president Mohammad Khatami for a referendum on the legitimacy of the government.

Finally, on the recurring topic of AECL, the C.D. Howe institute has weighed in with a 14-page Commentary, “Canada’s Nuclear Crossroads: Steps to a Viable Nuclear Energy Industry” which includes some recommendations well worth considering — is anyone in Ottawa reading them?