Wednesday Night #1439

Written by  //  September 30, 2009  //  Antal (Tony) Deutsch, Chilion Heward, Guy Stanley, Herb Bercovitz, Reports, Ron Meisels, Wednesday Nights  //  Comments Off on Wednesday Night #1439

In response to the video news summaries, there were several negative reactions about the way news is presented.
In a non-technical statement, our favorite technician reminds us that business reports and economic analyses carried on the nightly news are retrospective.  The average viewer is discouraged by the reports, believing that we are in a recession/depression, rather than looking to the activity in the stock market which is a viable indicator of where the economy is heading and is telling us that the world is in the process of economic recovery and we are coming out of it very nicely.
Canadian media commentators frequently misrepresent  or gloss over the respective areas of jurisdiction in the United States, and in the case of Buy American, leave the impression that it is up to Mr. Obama to solve Canada’s problems with respect to this policy. In fact, it is Congress, not the president which has passed the legislation requiring that American-made components be purchased for federally subsidized projects. Which is why it was a very clever move on Stephen Harper’s part to pay court to Congress when he was in Washington. [The appointment of Gary Doer, someone who comes from provincial-state relations may also be very clever in this respect] The new U.S. Ambassador is expected to present his credentials to the Governor General on Friday; as a close friend and supporter of Mr. Obama, he is expected to be a highly efficient conduit to the White House.
On another U.S.-related topic, some support was expressed for Chicago’s bid for the 2016 Olympics, along with concern that both President and Mrs. Obama were actively campaigning for the bid [Obama goes to bat for Chicago as host of the Olympics]. Rio’s bid is based on the fact that never has a South American country hosted the Olympics; are the Olympics a drain on the country’s economy? Certainly Montreal’s experience was less than happy.

Economic recovery and the markets
The market’s widely unexpected steady recovery left many potential investors unprepared as they saw it as a correction in a bear market rather than a genuine upturn. There appears to be a clear delineation between bears and bulls, with few – if any – in the middle.  Impressive (staggering) earnings worldwide have confirmed the force of the recovery – one Far East fund is up 78% year-to-date; bank stocks have doubled, meantime trillions of dollars – earning nothing – have sat on the sidelines. Taking into account the cyclical nature of the economy, the remaining question is the length of the recovery curve. To take the best advantage of the renewed energy in the bull market, one must act proactively.
One example: the Chinese are buying six billion bbls of oil in Nigeria.  Geopolitical ramifications and effects on commodities are  huge – Venezuela, Iraq, Iran …  The recovery is on — but how long will it last? An important factor in the current equation is the volatility of world currencies, with the Yen rising* (with possible negative consequences for exports), the pound dropping, and the Australian, New Zealand and Canadian dollars gaining strength.
*The yen advanced to an eight-month high against the dollar, fuelling fears that a stronger Japanese currency will hurt Japan’s exports and hamper its recovery. Hirohisa Fujii, the new finance minister, gave mixed policy signals, saying there was nothing “abnormal” about the currency’s upward trend of recent weeks, but adding that he has never said he would not intervene if the yen became too strong. See article
The opportunities are many but the wise investor will look for revenue growth from sales growth rather than from cost cutting.  A source of worry is the reappearance of investors chasing risk, the greed factor judged to be even worse than it was in 2007 and 2008.  The recession has been declared dead and the recovery confirmed.  When the inevitable correction occurs, the danger is that investors will panic.  In this economic climate widow and orphan stocks are but a distant memory, buy and hold is no longer a viable strategy. Outside of banks and resources, there are some excellent buys; accordingly, the market may well broaden. Much depends on the consumer in the United States and the fact that the banks aren’t lending. (China is a different case because of their emphasis on stimulation.) Buying gold is not an option.
2010 is expected to be a good year because there are individual stocks that may not even be in the Standard and Poor’s or Dow Jones that are doing exceptionally well, e.g. Rona, Baker Hughes The materials sector is where investors should be looking. Buy the stocks not the market – See more on Ron Meisels‘ views

Israel’s electric car grid
In one of the rare areas of the Middle East totally devoid of petroleum, but enjoying an ample supply of sunlight, Israel has introduced the infrastructure for electric cars exchanging batteries when they run low.  While the concept of harnessing a virtually unlimited source of easily accessible, clean energy is extremely seductive, its practicality, especially in colder climates is doubtful. Just imagine trying to keep your windshield clean with electric energy. Perhaps Canadians need winter and summer cars ( like winter and summer tires?

New terrorism techniques
The recent assassination attempt on the Saudi prince by a bomber who had concealed his weapon in  his body will lead to new security measures at airports. As Al Quaeda has already announced that it will share the new technique (which has been used for many years by diamond and narcotics smugglers) with like-minded groups, there is little reason not to alert the public to the reasons why they may soon be subjected to even more stringent (and disagreable) searches.

Michael Moore‘s new movie Capitalism: A Love Story which skewers our banks and our government and suggests that the “people” are gearing up for a “revolt” against “capitalism,” an “evil” system that, Moore hopes, will soon be replaced in our land by “democracy” is generating a great deal of discussion and mixed reviews, not all glowing e.g. Judith Warner in the NYT. At this point, we have only the reviews to go by , but once we have all seen it, it would be a good topic for Wednesday Night.

The Liberal problems in Quebec
With the passage of time, the little guy from Shawinigan, always the underdog who succeeded, becomes more and more appreciated.  Success in politics appears to be more a function of understanding unwritten rules than of either physiognomy or intelligence and Michael Ignatieff, regardless of whether he was right or wrong in the Coderre affair, has given a greatly appreciated gift to Stephen Harper, possibly his own head.  The only remaining question is the identity of his successor as Liberal leader. Despite the current travails of the LPC, it is likely that some seats on the Island of Montreal will become Liberal in the next election, including Outremont with Martin Cochon running to reclaim his old seat. LPC coordination in Quebec is very poor and in fact there is a lack of coordination at the national level.

In closing, tribute was paid to Bea Bazar and her remarkable life.

T H E  I N V I T A T I O N

It is with deepest sadness that we announce that our friend and loyal Wednesday Nighter, Beatrice Bazar O.C., died on Monday, September 28, just 3 weeks shy of her 95th birthday. Her son, Ron, informs us that a Memorial Service will be held on Sunday, October 4th at 11:00AM at Mount Royal Commemorative Services, 1297 Chemin de la Foret, (off of Mt Royal Ave in Outrement). There is a Memorial website for your comments.

Hans Black advises that on Sunday, October 4th, at 4PM the McGill Chamber Orchestra’s Opening Concert presents the celebrated Klezmer ensemble Kleztory for an afternoon of uplifting Central European “Freilichkeit” (Joy!) melodies in special arrangements for Kleztory and chamber orchestra. We celebrate the 200th Anniversary of Felix Mendelssohn with his tuneful Sinfonia No. 5 and relish Srul Irving Glick’s 20th century Suite hébraïque.
Yvette Biondi writes : Le livre de Frédéric, mon fils, sur les vins et la SAQ, OÙ SONT LES VINS? – LE PROBLÈME DE LA DISTRIBUTION DU VIN AU QUÉBEC , sera en librairie lundi le 1er octobre. Il sera également interviewé par Paul Arcand, journaliste au 98,5 FM entre 7 et 7 heures 30 a.m. En espérant que la SAQ ne soit pas trop outrée …
From an advance copy of the Press Release from Les éditions Hurtubise: À partir de l’éloge de la richesse du vin dans le monde, l’économiste Frédéric Laurin critique la situation de la vente et de la distribution des vins et alcools au Québec, d’un point de vue économique et viticole. En matière de vin, quand aurons-nous vraiment le choix? Après la lecture de cet essai, vous ne regarderez plus les tablettes de la SAQ de la même manière…

After last Wednesday’s Virgo extravaganza, we must revert to reality, much of which is disillusioning if not highly unpleasant.
Mr Harper’s strange behaviour last week as he bounced from the UN to Tim Horton’s to the G20 has been the subject of considerable debate. Denise Bombardier’s analysis in Le Devoir Le Canada : pays ou village? summarizes our disgust with the conduct of foreign policy – if one may dignify it with that term – by the Harper government. The Toronto Star asks “Will the real Stephen Harper please stand up? Is it the crafty politician who snubbed the UN in New York for a Tim Hortons double-double in Oakville Wednesday? Or is it the shrewd prime minister who embraced the world in Pittsburgh yesterday?” A crafty politician, yes, but doughnut strategy has holes deftly echoes our sentiments. “Canada’s challenge now is to make the Huntsville summit more than symbolically memorable. To safeguard this country’s future G-Something membership, Harper will have to craft an agenda that moves beyond accepting inevitable change to reinforcing this country’s role as a willing agent of change. For Canada to hold its world place, the Harper who stands up in Huntsville must be the shrewd prime minister seen this week in Pittsburgh, not the crafty politician who swilled coffee in Oakville.”
Guy Stanley observes: Most of Canada’s FP is remnants of Paul Martin’s government–especially Afghanistan and the G-20. What’s happened since? Is there a vigorous Canadian debate about Afghanistan? How about an in-depth discussion of the historic power alignments in the region. Has Canada a position on South Asia in general? Interestingly, Canada seems to have no position on Iran, although it is one case where perhaps US blundering seems to need a middle power corrective…Trudeau in China, for example (see today’s NYT). Not only Harper, but Canada, has little to say worth hearing on any major subject before the UN ..and the audience for Mr. H would surely have been only just above the number around a Tim’s table.
Unfortunately, the contrast offered by Mr. Ignatieff is not reassuring.
The Denis Coderre – Martin Cauchon – Michael Ignatieff spat is deplorable, discouraging and sad. We place most of the blame at Mr. Ignatieff’s door. As the issue began to boil over, the LEADER should have called in his Lieutenant, evaluated the situation, made a decision and informed Mr. Coderre that if he didn’t like it, he should resign immediately. Instead, we saw vacillation on the Leader’s part and an exhibition of arrogance on the part of Mr. Coderre that was positively breathtaking. And, once again, we ask: what is wrong with having an open nomination process?
A propos, we highly recommend the CPAC/Maclean’s debate between Andrew Coyne and Paul Wells – with guest stars such as Ed Broadbent and John Ralston Saul – on the state of Canada’s democracy  Our Democracy is Broken: How do we fix it? – it is thoughtful and thought provoking.
Jean Charest is doing his best to convince the Harper government to look better on at least one international stage – Climate Change in Copenhagen, however, we are afraid than even his best efforts will fail. Meanwhile, the Quebec government has announced funding of $300, 000 for Al Gore’s Climate Project to set up its Canadian head office in Montreal.
Tony Deutsch
points us to The pedagogy of the privileged a critique of the failure of the Business Schools to change in the wake of the global financial crisis.  We particularly enjoyed the comment that “More history classes would help. Would-be business titans need to learn that economic history is punctuated with crises and disasters, that booms inevitably give way to busts, and that the business cycle, having survived many predictions of extinction, continues to prey on the modern economy. The 2008 debacle might have come as less of a surprise if all those MBAs had been taught that there have been at least 124 bank-centred crises around the world since 1970, most of which were preceded by booms in house prices and stockmarkets, large capital inflows and rising public debt.” – Incidentally, the Economist website (which we admire greatly) is undergoing some changes, notably Schumpeter, a new column on business and management.  – So far so good.
(Guy Stanley comments: On management programs, I think Tony’s identified a real concern. The finance department captured the MBA high ground over the last few years and careers were made or otherwise on publication in finance journals–and investment banking was a top graduate career choice. I actually proposed bringing a very eminent economic historian to HEC but was advised that students would not be interested which, in the mid-90s, might well have been true. So now what? Minzburg’s view is that management is actually quite hard, cannot be taught exclusively through theory like a social science, and that programs should be revamped so that it includes a lot more practical experience in accomplishing management tasks. Maybe he’s right.)
Sign of the times: one Wednesday Nighter tells us that the man who cuts firewood for their house in the country recently turned up wearing a Harvard Business School windbreaker and when asked about it, replied “someone threw it out.”
The performances by Libya’s Gaddafi and Iran’s Ahmadinejad at the UN would be laughable (indeed the photos are) if not so replete with danger. Stratfor offers a quite dismal analysis of the choices facing President Obama with respect to Iran (and also Afghanistan)  and we share concerns that Geneva talks on Iran may fizzle, more sanctions loom, while finding it more than ironic that the talks will take place in the country that Mr. Gaddafi wants to abolish. Presumably this idea is the result of his son’s arrest there last year?  And what was with the Gaddafi on-again off-again visit to Newfoundland?  Was he really scared off by Lawrence Cannon’s threatened appearance to scold him?
According to various headlines, Thursday marks the sixtieth birthday of China. We presume this announcement might come as a surprise to a number of late emperors and their peoples, however, historical inaccuracy aside, sixty years of rule of the CCP have brought unimaginable changes at every level (excepting the rural poor) – who would have thought in 1949 that China would someday hold the key to the economic fate of the U.S.?
The Economist
describes the outcome of the German elections as ‘startling’, as it contemplates the fact that Angela Merkel’s CDU and the liberal FDP will rule Germany together, bringing a more pro-business  approach that champions reforms of social security, civil liberties, and above all lower and simpler taxes. Not everyone is enchanted and one commentator points out that the likely new Foreign Minister is “not really a foreign policy guy” – maybe he should join Canada’s Conservatives?  Which brings us back to where we started.
In closing, congratulations and best wishes to David Price, Sherbrooke-Valois and the team at the new NDG Free Press , sister paper to the Westmount Independent. The first edition (September 16) looks very good!
Some trivia

EU Sets Out to Save the iPod Generation’s Hearing  European countries have drafted a new rule that will require device manufacturers to take stronger action to protect consumers against hearing loss caused by listening to loud music on MP3 players. Even relatively low volume levels can be damaging to hearing after several hours of listening, studies have shown.
And why not?
Filling the pews … with paws
Doggy treats and bowls of water will be available at a monthly church service that will allow canines. It’s to ‘recognize their value,’ the minister says
Of course, Scottish shepherds have been accompanied to church by their dogs for many, many years.
For that special Christmas stocking?
Palin Finishes Memoir, Going Rogue, Out Nov. 17
Sarah Palin, the former Alaska governor and vice presidential candidate, has finished her memoir just four months after the book deal was announced, and the release date has been moved up from the spring to Nov. 17, her publisher said.
The final word
Breaking for lunch, [Margaret Thatcher] got her delegation into a private room upstairs in a restaurant, and began berating them as the waiter came in to take their orders–“Geoffrey, you were disgraceful! Douglas, you were pitiful,” etc.–until the waiter interrupted, “Madame Prime Minister, what would you like to order?” “Roast beef!” she thundered. “And what about the vegetables?” “They’ll have it, too!”‘


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