Wednesday Night #1227 – with Marc Thébaud Nicholson

Post Katrina
The news and discussion of the aftermath of Katrina inevitably continue, with outpourings of outrage and scorn for the Feeble Emergency Management Agency and its director, Michael Brown, not to mention Barbara Bush’s statement on a radio interview after touring the Houston Astrodome that ”What I’m hearing, which is sort of scary, is they all want to stay in Texas. Everyone is so overwhelmed by the hospitality. And so many of the people in the arena here, you know, were underprivileged anyway, so this is working very well for them.” No wonder her son just doesn’t get it!
Big Questions about the Big Easy
The debate about whether New Orleans should be rebuilt is heating up. Despite a number of cogent arguments that have been presented against rebuilding, starting with the House Speaker, Dennis Hastert, who as early as September 1 was saying that it makes no sense to spend billions of dollars to rebuild a city that’s seven feet under sea level, it seems pretty inevitable that the voices of reason could be overcome by the vacuum in serious planning options. There do seem to be some sensible alternatives under discussion.
but we fear that the desire to be seen to be doing something may overcome prudent, thoughtful considerations. Within perhaps a surprisingly short time, Topsy will have ‘just growed’ again.
Let us at least hope that the powers that be will study the experience of the Netherlands after the devastating floods of 1953.
Will there be a widespread negative effect of the New Orleans disaster on the housing bubble in island and coastal areas where there has been so much development of luxury housing and retirement communities? Some suggest that is not so much coastal areas as those below sea level that would be affected. A bigger question is whether anyone building in those areas will be able to get insurance.
If the bubble bursts, what happens to the Americans who have been taking equity out of their houses thanks to the rising prices? And in particular, what happens to the owners of houses and buildings in New Orleans that will be abandoned? How many will simply walk away? Is there an economic parallel in housing to the cracks in the levees and the eventual floodwaters?
In the affected areas residents will be in the market for new housing, but the question is whether the insurance companies will pay out for an Act of God, which is normally excluded from policies, although a substantial minority may have purchased additional coverage for such events. Risk Management Solutions of Newark, Calif., estimates that insurance companies may pay out from $40 to $60 billion in claims, the most ever. Businesses and homeowners will spend many billions more in uncompensated reconstruction expenses. (see: MSNBC “The New New Orleans”)
Everyone in Montreal should have fire-after-earthquake insurance, which is much more likely than having your house fall down

Random comments on the Economy (see also Jacques Clément Report)
Until recently, Methanex has been a favorite stock of Wednesday Night’s premier technical analyst, however the rising cost of natural gas has forced the closure of its methanol plant in Kitimat early next year. This raised Wednesday Night’s recurrent theme of fundamentals versus technical analysis when it become apparent that no one around the table had any idea of what process Methanex employs.
If you chart technical analysts, they are right 70% of the time, and if you chart fundamentalists, they are right 70% of the time
There is still a very large demand for chemicals from Asia, particularly China.
Bank of Montreal’s Sherry Cooper has recently written that Canada is in the enviable position of being the only one of the G7 countries with a surplus in both our current account and federal government budget, however she did not mention the trade surplus running at $4 – $5 billion a month, because it is part of the current account.
The impact of much higher gas prices has yet to be fully felt, however, small businesses and families living on the average income of $60,000 a year are already feeling the impact of the increase – the dry cleaner has to raise prices to compensate for the cost of fuel for his van, farmers have additional costs to bring their produce to market. (See below, additional notes on Katrina’s impact on agriculture)

Editor’s note: according to MSNBC “Economists predict that rebuilding [in the Gulf states] could add one- or two-tenths of a percentage point to the national growth rate all through 2006 and beyond. Already, some companies are poised to be winners.”

NEAR-TERM OUTLOOK:

  • Canadian Dollar: Over 85¢ U.S.
  • Crude: $63.00 U.S. – $ 67.00 U.S. (lack of refining capacity)
  • Gold: $445.00 U.S. – $ 450.00 U.S (weak U.S. dollar)
  • Euro: $1.2450 U.S. – $1.2650 U.S. (weak U.S. dollar)
  • Dow Jones: 10,900 – 11,000 before year-end (less exposure on
  • energy prices)
  • TSX: 11,000 before year-end

Housing
An interesting phenomenon in the housing market is the demand among retiring “boomers” for country properties as principal residences, fueling the local (Eastern Townships) market which is already highly prized by the children of boomers as an ideal and safe environment for their children.
How does this relate to the predictions that the end of cheap oil may well cause the demise of Suburbia, – as discussed last week -, and a parallel rise in the cost of downtown housing? Many of the families who moved to the suburbs did so because of the less expensive housing, along with better schools and a better quality of life. A 30% increase in gasoline and the related costs in heating oil, consumer products and services will have serious impacts on their cost of living, but as city dwelling becomes more attractive, how will they be able to afford to purchase a home downtown? Could mass transit (commuter trains in particular) be restructured in time to mitigate the costs of commuting? While ridership on public transit in Montreal remains high – the Canadian Urban Transit Association says it believes it is the highest per capita in North America – the system is underutilized by residents of the suburbs.
Although downtown schools in Montreal are currently losing students to the suburbs, this is likely a short-term situation. Especially with the renaissance of some outstanding public schools such as Westmount High, which is doing Advanced Placement schooling that is not available in any public schools and only a few private schools. In city centre, wherever you have exceptionally good public schools, the housing in the surrounding area goes up in price, so the premium the house owner pays is to some extent equivalent to the cost of sending children to private school

Quality of life: Singapore versus Canada
In any discussion of Singapore, it must be appreciated that the country is the product of the vision of one man, Lee Kuan Yew, the first Prime Minister of Singapore. Educated in England, he believed that Singapore must become a civil society and that the greatest impediment to social order is socialism. Thus, a strong work ethic is the basis of every public policy in the country and with this philosophy come trade-offs. In Canada, the individual pays higher taxes and receives Medicare, in Singapore, lower taxes and pays directly for medical services. But there are other factors such as limitations on freedom of speech and the right of assembly. Singapore offers great and inexpensive education for children, but no social assistance, including unemployment insurance, is provided. Family structures and communities must necessarily be very solid, because the family must support the individual who loses his/her job. This works in Singapore, with a small population and a high proportion of wealthy individuals, but the consequences of applying it in a country like the United States are unthinkable – even if George Bush would like to! There is also the issue of safety. Today in Toronto and Montreal, children’s safety is an area of huge concern to parents. In the 70s students could safely walk to school, ride the bus or metro, today’s environment is much scarier. In Singapore, this is not an issue – at all. Laws are strict and are not bent for any one, neither as an individual, nor a company, while in Canada we have many laws, such as the ones against drinking and driving, but many people bend the law.
Still, in contrast to many parts of the world, Canada offers a very secure system, an uncompromised judicial system and a constabulary that upholds the law.
Buying a company in a country where you are isolated by language is a very gutsy thing to do
The rules in Singapore are far more liberal than the ones in this house

William Rehnquist (October 1, 1924 – September 3, 2005) Chief Justice
The death of Chief Justice William Rehnquist, while not unexpected, came as an unwelcome surprise to the Bush Administration, already combating high levels of criticism for its handling of emergency assistance to the Gulf states. Given that John Roberts’ nomination looked relatively sure to obtain bipartisan consent, the president has opted to withdraw his nomination as Associate Justice and put forward his name as Chief Justice (a nice touch given that he once served as Justice Rehnquist’s law clerk). However, now a new candidate must be found to replace Sandra Day O’Connor at a time when Democrats having largely refrained from playing politics with the disaster relief are only too ready to make the nomination process difficult. And, as John Roberts is a young man (50) and ” the Supremes” are named for life, the Democrats will no doubt be far more stringent in reviewing his nomination to the powerful position of Chief Justice.
The importance (and influence) of the U.S. Chief Justice is enormous given that in any vote, the most senior Justice in the majority has the power to decide who will write the Opinion of the Court. Since the Chief Justice is always considered the most senior member, if he or she is in the majority then the Chief Justice may decide to write the Opinion of the Court (as Rehnquist did in several particularly important cases), or assign it to some other member of the majority of his or her choice; on occasion votes have been known to switch depending on the written drafts, making someone else’s draft the Opinion of the Court. Furthermore, the Chief Justice not only chairs the conferences where cases are discussed and voted on by the Justices, but normally speaks first, and can thus influence the framing of the discussion.

[Editor’s note: The office is often incorrectly referred to as “Chief Justice of the Supreme Court.” The United States Code specifies the title as “Chief Justice of the United States,” and thus, not just of the Court itself. The title changed at the suggestion of Chief Justice Salmon P. Chase, who wished to emphasize the Court’s role as a coequal branch of government. By contrast, the other eight members of the Court are Associate Justices of the Supreme Court of the United States , not “Associate Justices of the United States.”]

The Gala des Étoiles (which takes place, tomorrow, September 8) appears to be headed for success with a sold-out performance. This is due almost entirely to the efforts of the President and CEO, who is truly a one-man operation. Perhaps this is the only effective way of running a profitable event, as many cultural and charitable events are mired in confusion and hesitations created by ineffectual boards of directors.
The role of the unions in crippling a number of artistic events cannot be overlooked – the continuing strike of the MSO musicians, for example has caused the cancellation of the first four concerts of its 2005-2006 season. In a related development, the Federation of Teachers’ Unions is boycotting cultural events.

Additional note on Katrina’s economic impact on agriculture
The New York Times reports:
“In the Gulf states, the storm left farmers reeling from numerous other problems, including a lack of electricity to restore chicken and dairy plants to service, and a shortage of diesel fuel needed for trucks to save dying cattle stranded on the breached levees.
Farmers in some states in the Midwest had already endured the worst drought in almost 20 years. The storm, moreover, flattened sugar cane and rice fields in the South. And farmers nationwide must pay more for fuel to bring the harvest in and transport crops, lowering the profit they will earn when they sell them. Now Hurricane Katrina is adding to the pain by threatening to curtail exports.
In all, the hurricane will cause an estimated $2 billion in damage to farmers nationwide, according to an early analysis by the American Farm Bureau Federation. The estimate includes $1 billion in direct losses, as well as $500 million in higher fuel and energy prices.
Midwestern farmers are threatened by additional losses. Farmers are clearing out stored corn and soybeans to prepare for this year’s harvest, which they normally begin exporting at the end of September. But the hurricane caused substantial damage to waterways and grain-handling facilities, and hundreds of barges have been backing up on the Mississippi River with no place to go.”

I was hoping that Bill and Hillary could have run against each other for the Democratic ticket
You can be found on Google if you are a public figure, not if you are a private citizen … unless you are the son of David Nicholson

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