Wednesday Night #1175

8 September 2004

Bits and pieces
One guest commented on the cost of putting up a client at the Ritz in London where the charge is now $793 a night, compared to $150 for the Montreal Ritz. Others mentioned that the Montreal Ritz has been going downhill for some time, – the facilities not up to the expected standard, including the service at a recent lunch reception. It is understood that the hotel has been losing money, however it is rumored that the current Arab owners will not sell in case it is needed as a bolthole, should family members have to leave their country.

Absent friends
Tribute was paid to John Scofield who died recently in an accident. He was a very keen flier whose aviation school taught many people to fly. He was particularly active in passing on his enthusiasm for aviation to children.

News of the arts

40th anniversary of the Beatles’ visit to Montreal, when tickets were $5.50 each!

A sculpture garden has just been opened at the MMFA in memory of Dr. Max Stern who died in 1987 and his wife. Max Stern, arts benefactor, art historian, and owner of Montreal’s Dominion Gallery, was known for buying artists before the market recognized them, and for his practice of loaning paintings to encourage young people to invest in art. The Leonard and Bina Ellen Gallery is holding an exhibition September 1 – October 9 which focuses on works in private collections that were acquired through the Dominion Gallery. The Montreal Museum of Fine Arts is producing another exhibition that will focus on works given by Max and Iris Stern to public collections.

Heidi Hollinger and Sacha Trudeau are going to Russia to do a story for Maclean’s.

The word from the Gala des étoiles dress rehearsal is that the leading Russian ballerina is very attractive, and not overweight! On previous occasions the dress rehearsal has been open to ballet students, which is a marvelous opportunity for the youngsters to see the Super Stars. The performance on September 9 is sold out.

Diamonds are forever
Forest Gate has recently acquired top-notch geologist, Peter Duplessis, from De Beers for whom he was working in Botswana. While it would appear that there might be huge differences in diamond mining in Botswana and in Canada’s North, the grid analysis of the assay samples produced the needed indicators for diamonds. Geological expertise is more important than the equivalency of the geology.
Canada is sadly lacking in expertise among analysts in diamond exploration – it is, after all, only a 10-year old industry. Grid analysis for diamond exploration isn’t there yet – most analysts are still looking for gold and base metals. There is an opportunity here. Investors are underestimating opportunities in existing operations and will get into the market late as a consequence of their lack of knowledge.
André Audet, Chairman and CEO of Majescor Resources Inc, has recently joined the Forest Gate Board. The company now has very promising properties, an enhanced management team and is in funding-raising mode.
Canadian diamonds are both gem (80%) and industrial quality.

How much does PR affect stock prices?
There is a strong correlation between the amount of Press on a stock and its performance on the TSX. While this might be construed as rigging the market, there are traps set by the market makers to catch attempts to push the market. These are now obvious with Direct Access.
The more press we had, the more we could blow smoke in the market, the higher the demand for the stock
We appeared twice on the RoB and shortly afterwards we were trading millions of shares
When we asked why the report indicated numbers for growth rate in Canada that so exactly reflected our numbers, the consultants said that it was because the numbers were widely reported in the media. But the quotes were largely mine – so we were actually paying the consultant to reiterate my quotes. It became a self-fulfilling prophecy

Housing
The City of Montreal has a project for 5000 units of subsidized housing (co-ops) with a completion deadline of 2005. Meeting the budget is an increasing problem as in this “white-hot” market, tendered bids by trade unions are very high, while income levels (of those for whom the housing is destined) are low. Another problem for low-cost housing is that most of the best land for development is already taken and what remains is contaminated land from railway operations and the like, thus adding decontamination to project costs. Why do we need so much subsidized housing? A lot of people are living on less than $21,000 and these people carry out the work required at the bottom rung of service industries. But the stress point is coming if salaries don’t keep pace as interest rates rise.
In another niche, people are buying condos because they got burned in the stock market -25% of condos in Montreal are selling to investors who expect to rent them to pay the mortgage. Some expect that the Market will be flooded. Others point to demographics, suggesting that Boomer kids (“Echo generation”) are buying condos earlier and earlier and may offset the effect of greater available supply of housing. However, mortgage rates will rise and with the rising interests rates some recent buyers of condos will not be able to maintain the mortgage payments and the market will be flooded with sales.
Banks may slowly abandon their generous financing of housing – it used to be that you could buy only with 25% down payment, but the banks have found ways of bypassing this requirement, bringing in many new first time buyers.
With low mortgage rates, many of the best tenants who have been renting, figured out that for the about the same monthly outlay they could acquire a house. The housing market has been re-enforced by the net inflow of people into Montreal, who want to buy a house.
Today, you can buy an apartment for less than a car
The rental market is slightly softer because best tenants are taking advantage of the low mortgage rates
Prediction: the Affordability index is close to its straining point and overall housing prices therefore may stabilize.

U.S. Presidential campaign
In a reversal, one observer who had previously predicted a narrow Kerry victory now thinks the George W. Bush will be re-elected. This is based on conversations with people in Massachusetts who question Kerry’s depth and point to poor [Senate] attendance record, along with his support for the war in Iraq. Other factors include the strong Republican Convention with heavy emphasis on security.
In contrast, it was pointed out that the military death toll in Iraq has just reached over 1,000. This widely publicized figure is having an impact among voters. Military families, and others also point to the fact that George Bush has never attended a military funeral (presumably because if he did it would appear on television).

Discussion of the Ray Fair Equation followed. This Yale professor, author of ”Predicting Presidential Elections and Other Things,” claims that economic growth and inflation are the only variables that matter in a presidential race and that therefore, the war in Iraq will have no influence on the election. He also maintains that the chances that Bush will lose are very small, and discounts the effect of social issues like gay marriage and the overall question of a more just society, saying that “all that stuff that you think should count averages about 2.5 percent.”
[See New York Times Magazine August 15, 2004]

Others suggest that history demonstrates that there is no change in presidents during a war. However, closer examination of recent history shows that in 1944, the country was united in believing in the “just war”. In 1954 (Korea), sentiment generally favored the war that was under the banner of the UN. In 1968, Lyndon Johnson withdrew from the race, and Robert Kennedy was assassinated. Is there really a parallel to be drawn with today’s very hostile non-war in Iraq?

Two hundred billion for Iraq, but we can’t afford healthcare for our veterans
(John Kerry)

Expiration of federal assault weapons ban
The ban was enacted to get rid of semi-automatic weapons (“weapons of murder”), but the Republicans do not want to continue it because of the pervasive influence of the NRA. Democrats are reluctant to act as they fear the NRA’s ability to mobilize the their membership against “unfriendly” candidates. Law enforcement officials are “mortified”, but powerless to do anything. How to change the culture that is rooted in the history of the expansion of the U.S.? In contrast, there are more guns per capita in Canada than in the U.S., but Canadians don’t use their guns in the same way.

[Editor’s Note: The federal ban expired Monday after 10 years because Congress did not act to renew it. Republican leaders in Congress said there was no public call for renewing the law. However, according to the most recent National Annenberg Election Survey, 68 % percent of Americans wanted to extend the ban.
On Monday, Kerry blasted Bush for abandoning the decade-old federal law prohibiting the sales of 19 types of assault weapons. “George Bush made a choice today,” said Kerry, accusing Bush of siding with the National Rifle Association. “He chose his powerful friends in the gun lobby over the police officers and the families he promised to protect”]

The NRA will endorse the president for re-election after the ban has expired
There will probably be more of these [semi-automatic] weapons in the United States than in Iraq
Gun dealers in Texas are ecstatic [over the repeal of the ban]
We are reminded that support of SDI and the Defense industry, with products like the Patriot missile program, which sold like hot cakes, even though they really don’t work, helps create jobs and will help Bush get re-elected. Canada does not gain from abstaining from SDI, especially given the very small defense budget that Canada maintains because of the United States’ military capacity. Is the “defense” message a prelude to offense – control of space?

Notes by Gerald Ratzer
Edited by Diana Thébaud Nicholson