Wednesday Night #785 – the Economy + Updates

19 March 1997Prologue
David and Diana’s E-mail invitation to this meeting indicated that it would take a close look at the economy. This it did indeed, but not in the direction anticipated by this observer. Few if any of the opinions expressed gave rise to debate, not because the guests were not listening, but because they appeared well thought-out and profound. If not controversial, it came very close to being one of the most informative Wednesday nights to date. A sampling of opinions expressed, follows.

Montreal and Quebec Economy
Although Montreal is not booming, it is not as in bad shape as believed. The aviation business is doing very well.
As for Eaton’s request for bankruptcy protection, this is not a unique situation. The habits of the population have undergone a profound change. There are basically two types of consumers in the retail market, namely those who buy for price, and those who are prepared to pay the price to shop in upscale retail stores. Eaton’s appeals to neither group, offering too broad a variety of merchandise in stores that are too large and without focus, not to mention the poor service. Caplan Duval has fallen into the same trap. Additionally, Eaton’s has opened outlets in such centres as Cavendish Mall in an area whose population is not sufficiently large to support them.
Consumers have become more discerning than they used to be, especially in Quebec. They buy merchandise that represents good value and lasts longer. The Bay has recognized this and that is why the Bay has succeeded where Eaton’s has not. This change in sophistication is partly because many women are no longer housewives who can permit themselves the time to browse and shop. The modern Quebec woman is sophisticated, works for a living, demands service, will not tolerate rudeness and will buy one or two good outfits which she will wear over a long period of time, changing accessories to give the appearance of freshness and change. She knows value and demands knowledgeable service. The cross-border shopping of a few years ago has grown into a world-wide quest for the right merchandise.
Service and quality have improved here. Boutique operators are filling the void left by the more slow-to-adapt department stores. At the low end of the scale, Zellers is succeeding because of value. On the other hand, rents in retail stores are as high as they are in Toronto, taxes higher, and the shopping population not as numerous. The viability of new retail outlets is not assured
There is a great increase in new business especially in high-tech. This is the result of a great deal of venture capital looking for viable ideas. The source of this venture capital is mostly the Caisse de depot and Fonds de Solidarité fund.

Interest rates
Greenspan will almost certainly raise interest rates.

Tax cuts promised by Jean Charest
These are not to be taken too seriously. The Progressive Conservatives know that they have no chance of forming the next government after the June 9 federal election . They are attempting to reestablish a degree of credibility by increasing their numbers in the House of Commons, without risking forming a government and having to welsh on their promises. If Jean Chretien is smart, he will resign immediately after the election, [Editor’s note: It didn’t happen until 2003] allowing Paul Martin to take over. If he does not, the Progressive Conservatives [Editor’s note: In 2003, the PC party membership voted to dissolve the party and join the new Conservative Party of Canada formed with the Canadian Alliance] have a good chance of winning the following election. [Editor’s note: the political crystal ball was a bit clouded.]

The Market:
In an unprecedented historical moment, all economists present declared themselves bearish.
Non-economists pointed out the wild card in the world economic near future, namely the millennium fallout:
– The year two thousand computer crisis. [Didn’t happen] This will affect not only the computer as we think of it, but thousands of other devices containing microchips. Those companies and individuals who have not already started working on this problem will have an insurmountable crisis on their hands in two and a half years.
– Some law firms are gearing up to face the problems and opportunities arising out of the litigation resulting from this event.
– All over the world celebrations and millennium events will undoubtedly have an unforeseen impact on the economy.

Real Estate
The real estate picture is not great in Montreal, although there are great deals to be had. For example Notre Dame de Grace is doing very well because it contains a good ethnic and linguistic mix.
Calgary is doing extremely well and will do so for at least the next three years.
There is no great source of growth in the Montreal area. Immigration is minimal, and government has used up an amazing sixty percent of the growth in gross domestic product. On the other hand, on Ste-Catherine street and on boulevard St-Laurent, available street-level space is fully rented, a dramatic change from recent months. This has resulted in some job creation.

Quebec Budget
The provincial government has no choice but to do what it is doing. The problem is not that it is cutting spending, but that it must reverse a previous trend to embark on spending programs that we couldn’t afford.

Universities
Québec had the right idea in establishing CEGEPs where students can take technical or some professional training or continue for a university degree. This has not been followed through, so we have a shortage of technical graduates and too many university graduates who cannot find employment. The days of student frivolity have passed. Today’s university students take their education very seriously. This has improved the quality of teaching.

Oil
The price of oil is very well contained within the $18 to $22 per barrel price. There has been a lot of new oil discovered in North America in the Gulf of Mexico area and in Alberta. In addition to this, the United States can always subtly influence the breaking of the quota of individual OPEC states. No dramatic change is expected.

Pornography on the Internet
This was the only topic on which no agreement could be reached.

Those Wednesday Nighters regulars who missed this meeting are not likely to experience another as exciting for some time.