Wednesday Night #1448

Special thanks to Margaret Duthie for assiduous note-taking

It seems that almost every week, we celebrate another achievement by a Wednesday Nighter. This week it was the turn of Bruce Kippen  who has just published his first novel Lords of the Frontier.  It is an “under-told” story from an expert on the early development of Alberta’s oil industry and deals with a critical era in Canadian history between 1890 and 1940 during which the Industrial Revolution, the First World War, the Boom and Bust of the 1930s ad the Second World War took place.  The author says “I call it a historical novel because there’s a lot of history in it through which the characters in the book live and built their careers.”

President Obama’s Address on the War in Afghanistan
President Obama’s speech announcing the “troop surge” has not been interpreted as the definitive solution that will have us rid of the bad guys who want to dominate the world and destroy the West.  The closest analogy to the success of that endeavour would have been the conquest of the barbaric tribes by Romans, celebrated by the erection of a string of forts, (le trophée des Alpes) across Europe, only one of which remains standing.  The major difference in the current crisis is that the tribes have money, the means of rapid transportation and are close to acquiring nuclear weapons.  They do not follow international rules of war. Is there a goal to reunite feuding tribes? The fraud and corruption is so great. Some experts believe that President Obama and his advisors completely misunderstand the Pakistani tribespeople – they have warred for centuries and live for bribes. The idea of “democracy” in Pakistan is a mythical idea.
The problem is complex.  Al Qaeda is losing power as the Pakistan-based Taliban acquires strength. Nonetheless, Osama Bin Laden  issued a fatwah against the government and army of Pakistan in 2007, which presumably is still in effect. The terrorists in Pakistan are smart, adaptive, dedicated and ready to die to destroy America.  It is not beyond the realm of possibility that the Taliban, keeping the population illiterate, will gain control of Pakistan and the bomb.  Their prime target is the West, and more particularly, the United States, the symbol of equality and freedom.
The troop surge is not a self-indulgent American exercise, but probably one that should concern the world.  It is to be hoped that establishing multiple pockets of honesty, equality and affluence within Pakistan, an ambitious target, will incite the movement to spread throughout the country, providing a buffer between them and the Taliban.
At this point, it would appear that the Americans have followed the path of Alexander the Great, the British and the Russians, who, to their regret, have found Afghanistan inhospitable, intractable and unmanageable as a country.  The transformation from tribal to democratic government appears to have been too great a challenge for those countries that have made the attempt. General Petraeus’ strategy to establish islands of prosperity and stabilize and let them expand, does not appear to have a great probability of success because it is, of necessity, of limited length.  Although impossible in this post-imperial era, the announcement of a permanent presence would most probably have had a much greater probability of success.
The American sacrifice in Iraq and Afghanistan has impoverished the U.S., not only in terms of money, but in spirit as well.  The numbers of the military killed in a war that cannot be won has certainly had a negative impact, but those wounded, returning to the small cities and towns across the nation have had and will increasingly have a devastating effect on them with the passage of time.  The nation’s great expectation of a President who, it was anticipated would transform the United States, will undoubtedly be tarnished by this series of events, one inherited by him. Certainly not through cause and effect, the United States is ending this war in debt of enormous proportion.  If history is any indicator, the impoverishment of the U.S. will adversely affect its position as the world’s leader nation and policeman.

The economy and the market(s)
The world’s financial crisis is NOT over.
Last autumn’s market free-fall has left most would be investors either very bullish or very negative, with relatively few in between.  For those more realistic, patience and contrarianism have paid off.  The original fear and panic have provided incredible values in the market that will probably not be seen again in the next decade.  We are experiencing a very young bull market, not quite credible to the cautious, frightened would-be investors who are not yet buying into the idea that the economy is in recovery. The era of buying and holding is long over but quality remains the main criterion in investment.  Considering low interest rates, interest-bearing instruments do not appear to be good investments.  The Chinese Central Bank has advised the individual banks to build up their reserves, indicating a possible problem in Southeast Asia.

Soundbites
Look at food companies and soft commodities in light of the problems the world is facing going into the next decade. China and India are changing their lifestyles.
Watch the geopolitical situation and consumers looking to buy essentials rather than luxury spending especially in the US and SE Asia. The beneficiaries will be Canada, Australia, South Africa and Brazil. Oh Canada our home of natural resources!
With time, watch for increased consumer demand from emerging markets.
Look for robust growth in developed countries in the first half of 2010. This will continue with hiccups.

Market predictions
The stock that did well in 2009 will not be the stock to do well in 2010. We will get a huge rotation and broadening out of the market. Many boring stocks are doing very well.
Portfolio managers historically tend to ensure that they are fully invested as year-end approaches.  In anticipation of this ritual, a rising market is anticipated until Christmas, followed by some profit taking in January.  The long-term boom market is believed to be intact and 2010 is expected to be a good year.  However, long term, the technical analysts point to a forty-year cyclical secular market decline, which, if valid, can be anticipated to again visit us in 2014.

Gold at $1200 peaked too soon and is now back to $1100. It will rise again as high as $1300 and longer term may go as high as $3000.

The recent layoffs at Bombardier have raised no panic alarm.  Bombardier is currently very involved in transportation and will be for some time.   In 2012 and 2013, many aircraft will be reaching the end of their thirty year lifespan, at which time Bombardier will again be heavily involved in the supply of fuel-efficient replacements.

T H E  I N V I T A T I O N

This week is filled with an assortment of somewhat unrelated topics, although sooner or later the thread always becomes the world economy and the impact of events on it.
A is for Afghanistan, as it often is, and the focus will be on President Obama’s Tuesday speech at West Point, which according to media sources will introduce an exit strategy along with some stiff requirements for the Karzai government to clean up its act. A is also for AJE – Al Jazeera English – and the welcome decision of the CRTC to permit it to serve the Canadian market. We have been devoted followers of Al Jazeera online and are delighted.
C is for corruptionthe elephant in the room, according to Kevin Dougherty – and why the Charest Liberals are so reluctant to hold an enquiry; also for Credentials – the welcome news that – at long last – there is a plan to fast-track recognition of foreign-trained professionals’ credentials – something that many Wednesday Nighters’ have advocated for years.
D is for Dubai World and what the Economist terms A financial sandstorm with consequences for the global economy [and some questions raised about sovereign wealth funds]. It appears that the UAE Central Bank (follow Glenn Goucher’s advice and give your central banker a hug) will bail them (or at least the exposed banks) out, but no doubt with the same, if not greater strictures than President Obama plans to impose on Mr. Karzai.
E is for the case of the purloined e-mails – not a brand new story, but one that has had both deniers and proponents of global climate change in an (even greater) prolonged and nasty spat. Christian Science Monitor ; CBC ; Yahoo! news
I is for Israeli intransigence over the settlements issue. Although the government has announced a temporary moratorium it does not apply to areas in the West Bank that Israel annexed to its Jerusalem municipality after capturing the territory from Jordan in a 1967 war. Inevitably, the Palestinians are not impressed.
N is for nuclear and two stories this week. The first is Iran’s insistence on expanding their nuclear program:
Defying the UN just days after receiving a rebuke from the International Atomic Energy Agency, Iran pledged to add 10 more plants and greatly increase its production of reactor-grade uranium, a dramatic expansion of its current sanctioned nuclear program. Authorities from France, Russia, Germany and other nations condemned the plan, promising to consider new sanctions, while Iranian authorities said the expansion came in response to pressure brought by the UN Security Council members plus Germany. Los Angeles Times (11/30) ,BBC(11/30)
The second is the Economist report that a uranium shortage could derail plans to go nuclear to cut carbon emissions (what about Iran’s plans?)
P is for the Plateau and Projet Montreal’s plan to give the area a green makeover. It sounds idyllic, but one wonders how businesses and citizens will react – not to mention Montrealers (closing down Camilien Houde road to vehicular traffic?)
R is for the Richard Colvin/Afghan detainees story that continues to titillate, but our question is, why is this old news coming up now? And what has motivated the obviously sincere Mr. Colvin to risk his career at this juncture?  In our opinion, the best analysis of the story is offered by Examiner.com (not The Westmount), while the CBC maintains a lengthy dossier on who said what when. Former Ambassador Jeremy Kinsman’s piece Time for more public service backbone does a fine job of explaining the answers to our wonderings about what motivated Mr. Colville to go public now.
S is for the Somali pirates who are at it again – this time capturing a huge oil tanker with 28 aboard. This has been going on for months and months and still nobody seems to have a solution. No wonder we cannot solve global problems!
Z is for Zamboni – Not the machine, but Dr. Paolo, whose thinking outside the box brings promising new treatments for MS and hope to many.
Finally, we could not resist giving you this valuable piece of information related to climate change
Australia aims to develop greener sheep
Australian scientists are working to identify a genetic link that causes burping in the hopes of breeding sheep that burp less as part of the country’s efforts to battle climate change. Agriculture accounts for 16% of Australia’s greenhouse-gas emissions, and 66% of agricultural emissions are methane from farm animals. BBC (11/29)

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