Wednesday Night #1404

T H E  R E P O R T Video and photos

John Updike has died. Although hailed worldwide as a literary giant, his appeal has escaped some Wednesday Nighters – perhaps we should try harder.

It was  indeed a dark and stormy night  and it was a small brave band (no economists) that battled the elements and was rewarded by a highly convivial, stimulating discussion led by new guest Diana Clarke, introduced to us by Donald Patriquin from whom she had commissioned a musical  composition for the Youth & Spirit / Canada Day Event on July 1, 2004 (the year of the Athens Olympics). As  Founder and Executive Producer, Diana  conceived and organized this national event that featured 100 Olympic Medalists & 600 entertainers;  the country’s largest Canada Day Event (500,000 attendees) and gathering of Olympic Medalists in history – and the total cost, we are told, was $7,000. Wow!

Diana, who seems to re-invent herself every few years, is on the verge of launching a new company to which she refers as “the Google of local shopping”. The concept is based on the fact that 97% of all retail sales are generated by in-store sales.
Lacking economists, much of the proposed agenda was deferred in favor of  introducing Diana’s project with the recently-released statistic that there are now one billion Internet users around the world [in fact this figure was previously given for 2005], 18% of whom are in China. [Canada’s usage].

The budget – deficits and stimuli
Now we know. It’s a return to big government and big deficits. It’s effectively a Liberal budget, with a lot of public works. The government predicts budget deficits totaling C$85 billion over five years – the result of a recession and a C$40 billion two-year stimulus package packed with infrastructure spending, tax cuts and targeted loans. CIBC’s Jeff Rubin believes that most Canadians will want the government to do even more. Of concern is the absence of investment in science, technology and innovation. Furthermore, the lack of long-term planning associated with the new infrastructure programs will  lead to the problems identified at Wednesday Night: tired, out-of-date infrastructure will be replaced only by new infrastructure based on the same hypotheses and planning parameters, e.g. are we going to improve our highways so that everyone can buy more cars, drive them further and use  more petroleum from the tar sands?
From a political standpoint, the budget is obviously ‘supportable’ by the Liberals, thus eliminating the prospect of an imminent and highly unpopular general election. Aside from hurting Jack Layton’s feelings (no more coalition plans), and arousing the inevitable ire of the Bloc, it is a safe budget. Finally, Michael Ignatieff’s imposition of regular spending reports to the House essentially means that each report may be considered a matter of confidence, and thus enables the Liberals to pick the time to topple the minority government. A downside to the reporting required is that this could be an incentive to simply ‘shovel money out the door’ with ensuing scams and scandals. The value of tax cuts for the upper income bracket is questioned by some and a  (radical) proposal would see excessive executive compensation curtailed by a tax rate of 90% for anyone earning over $500,000, and 95% for anyone earning over a million. This could engender a very costly brain drain. It can be argued that a lower tax rate will benefit the economy by eliminating some of the black market transactions (e.g. Saturday sales on Chabanal) that exists today. A parallel benefit would derive from the government’s proposed contribution to householders’ costs of renovations – to obtain the government subsidy, householders will have to present bills, with GST and PST paid – no more under-the table cash to contractors.

Internet-based comparison shopping
Studies show that today the principal use of the Internet is for e-mail/messaging. Second in importance comes (according to the study) Shopping or Local. Buying on the Internet has not quite turned out as originally expected. The importance is shifting away from global e-commerce to local convenience addressed initially by Yellow Pages online; the auction sites like e-bay,  and classifieds sites. While most of us have searched the web for a particular product, or to do comparison shopping, however, it is not infrequent that the shopper decides after finding out what s/he needs to know that s/he would rather buy from the local merchant, thus avoiding hassles of returning faulty or unsuitable merchandise, and ensuring that there is some local support system when required.
Diana has spent the last few years developing an Internet ‘local search/comparison / shopping’ software . It is easy today to go on the Internet to search a product and buy it online (Amazon is the typical supplier). But searching for where you can buy the product locally is a different situation. Diana’s product (Ulantis) will be the first product on the market that enables  local one-stop pre-shopping by ascertaining where the consumer is, how far he is willing to travel to pick up the item and what he is willing to pay. With a data base of the inventory of department stores and independent retailers, Ulantis can tell the shopper, where the best price is, location and where it is immediately available, and can arrange for the product to be reserved for pick-up. For retailers, the advantage is that this is a cost effective method of reaching 75% of their market (the percentage of local consumers who  are not using print, but are using the Internet as their research tool, and are not communicating with the street). As the impact of the recession becomes more evident, retailers are cutting advertising budgets and closing stores. An Internet presence in the form proposed by Ulantis, may well be the solution. For the consumer, the advantages are that shopping is accomplished more quickly and efficiently, with the societal benefit that they then have more time with their families or for other social activities.
And how do you generate the traffic initially? By co-partnering with high volume websites, and by paying the search engines like Google, where ads are very effective. Right now there are about 11 billion searches – expected to reach 25 in two years – on Google and Yahoo for local products/information.
Following a successful beta test in the U.S., Ulantis is currently not currently publicly accessible while the necessary financing is raised for the public launch of Phase I. Currently, the goal is to launch in the U.S. in the first year, go international in the second and by the third year, the mission of having established open – and profitable -communication between the retailers, manufacturers, shopping centers and the consumer will have been accomplished, and the baton can be passed to others.
Diana has another goal connected to Ulantis. She will create a “Youth and Spirit” foundation with 5% of the company’s profits to spread the message that if young people believe in themselves, they can achieve their dreams.

A somewhat similar online service – ZipLocal -exists, although t is closer to Yellow Pages in some aspects.  One difference is that this site lists many professional services, although not exclusively, and appears to rely on recommendations (reviews) by consumers. [We did not find any reviews for services; on the other hand searching for hardware gave us an excellent Aubuchon site, with detailed, illustrated product/price list and customer reviews. Whether or not this answers the question raised regarding availability in inventory of a specific item, we are not sure]

Medical considerations
Sauce for goose not sauce for gander?
Giving the hypothetical example of a doctor who directed his patients to a physiotherapist who consequently derived some 25% of his income from the doctor’s referrals, one Wednesday Nighter highlighted that what is acceptable in one field of endeavor may be anathema in another.  In contrast to the well-accepted business model of alliances and pay for delivery of customers proposed for the development of Ulantis – or indeed similar projects –  for a medical practitioner such practices would be considered kickbacks and a reason to lose the license to practice.
Open source software solutions
As the medical profession seeks to develop electronic medical records, a group of 33 doctors turned first to commercially available records whose cost amounted to some $10,000 per doctor, plus $2,000 in annual fees. In the end, they have opted for OSCAR, a free open source software that was initially developed at McGill and now at McMaster. The total cost for the group of doctors was $10,000. The results have been extremely satisfying as the medical professionals share, modify and improve the forms. Some countries, like Belgium, accept open source software solutions for their healthcare systems.

THE INVITATION

It’s all about the economy – and the budget – and the global economic downturn (why does that sound so much less intimidating than financial crisis?). No matter what the other news slipping through our mail slots (e or otherwise), this week, there really is only one topic.

Oh yes, by Wednesday Night we may, know whether Canada is going to be in roughly the same political situation as Iceland. Well, no, we can’t be, because Iceland had a coalition government – we never got to that stage, did we? And now, as Icelanders turn to Gimli as a refuge (who knew that Manitobans are known as Vestur Islandingur – West Icelanders?), may Canadians soon trek to Reykjavik?

Now we have seen what THE BUDGET looks like (shades of Pogo – ‘we have met the enemy and they are us’ -?) Certainly the Harper government has been preparing us for deficits, by merrily announcing spending/stimulus programs along with tax cuts across the country – $20 billion  some say and who is counting?  Meantime, the Liberals are biding their time, hiding behind pious declarations that “We will be asking ‘Does this budget support the vulnerable? Does it protect jobs of today, jobs of tomorrow? Is it regionally fair? And does it avoid saddling our children with massive debt?” (that was John McCallum speaking). All  was revealed on Wednesday when Mr. Ignatieff demanded regular budget reports as the price of Liberal support. Sounds sensible to us.

Which of last week’s forecasts of the economic outlook do you believe: the Bank of Canada outlook or Kevin Page’s grimmer forecast?

Speaking of pious declarations, we suspect that there will be real entertainment for cynical observers when the World Economic Forum opens its Davos doors on Wednesday. Amidst all the news about what the FT refers to as the Mood of sobriety and self-recrimination, the bankers who are adjusting to the idea of REGULATION (gasp!), high-flying financiers who have crash landed (John Thain would be one after his office makeover) and will not be there, is this short piece on the “manifesto” of the Global Agenda Council/Design group. It’s far more interesting, with its emphasis on innovation, than anything else we have seen. Guy Stanley should like it.

A propos Davos, we cannot resist this quote “Tony Blankley made the perfect comparison: “Thain and these CEOs have been studying at the Marie Antoinette School of Public Presentation,” he said. “The crassness and the stupidity are stunning… They ought to be boiled in oil.” More on Huffington Post.

We would call your attention to Tony Deutsch’s latest addition to our Required Reading, Alan S. Blinder’s recent New York Times piece, Six Errors on the Path to the Financial Crisis  about which Tony succinctly says: “I think he has it right”. Maybe he meant to quote My Fair Lady, “ By George, I think [s]he’s got it”? Whatever the stamp of approval, we are impressed with Professor Blinder’s lucid arguments and nice turn of phrase.

Tony has also called our attention to the 30^th Annual McMaster Conference on Economic Crime, which this year focused on Economic Crime Prevention. Maybe because the topic is crime, the introductory web page is not like any other business school-sponsored conference we have seen. Sadly, the excitement fades when we read “The strength of the symposium finds itself in the dialogue between key sector-specific modules delivered by industry experts and faculty.” Surely there is fodder for Jon Stewart in ‘conference-speak’. A related piece of special interest is Purdy Crawford Faces Canadian ABCP Retail Noteholders in Public Meetings Read and weep!

We were all so taken up with pre-Inauguration excitement, we almost neglected the findings of the Expert Panel on Securities Regulation, released on January 12, and one of its key recommendations, the establishment of a single national securities regulator, something it seems Wednesday Night has advocated for a long time. We are, therefore, dismayed that Alberta has decided to oppose the idea, claiming it to be an infringement of provincial jurisdiction.

A new Wednesday Nighter has suggested that we take a serious look at Sprott Asset Management reports, including Surviving the Depression (December 2008), adding “Please note that while this particular assessment is rather grim, I believe it is an important scenario to consider, one I give a probability to of 50% easily. I believe the probability of a 1-3 year recession is about 30%. Other scenarios make up the balance of probabilities.”

This tour d’horizon barely scratches the surface. The U.S. stimulus package, the squabble between the U.S. and China over manipulation of the yuan, early initiatives of the Obama administration on foreign affairs, particularly the Middle East and Muslim world  and environment, Eastern Europe’s malaise and the related euro issues  and, and, and. We should not neglect the counterweight to Davos – the World Social Forum in Brazil

Finally, we would like to call to your attention for reading, pondering and discussion the provocative NYT op-ed piece How words could end a war – all so simple, if only.