Wednesday Night #1335

3 October 2007

We will continue our high-tech education this week in the company of Guy Stanley OWN, newly-appointed Director of the Technology and Innovation unit of the Canada Conference Board. Last week’s introduction to the work of the NRC through the eyes of new Council member, Margaret Lefebvre OWN, was not only enlightening, but inspiring. We are not sure if there is a connection, but admire the infommercial “Marketing Profile celebrating Corporate Ingenuity and Success” on NRC Aerospace that appeared in the business section of today’s papers.
Nor will we neglect our political education, as matters are certainly becoming more and more interesting as the Speech from the Throne looms, along with the possibility – perhaps inevitability? – of an early election. Between the Outremont results, the announcements by disgruntled almost-candidates Marc Garneau and Paul Leduc that they would not be running, the impending departure of National Party Director Jamie Carroll and whatever else may break in the next 24 hours, we are looking forward to a lively discussion with Peter Trent OWN, everyone’s favorite non-candidate.
How blessed we are that when our political dramas unfold, nights of long knives are figurative and not literal as is the sad case in Burma, where resolution of the brutal crackdown by the military rests on the shoulders of UN special envoy Ibrahim Gambari while the good faith of the military is at the least, questionable. The sense of helplessness is overwhelming when confronted by events such as these in a country where the ruling clique seems totally indifferent to world opinion. As appears to be the case more and more frequently, China holds the key and we can only hope that in that country’s quest for respectability – and respect – in the run-up to the Olympics, it will exert the necessary pressure on the Burmese military kleptocracy.
Of all the media coverage of events in Burma, we have found the BBC to be outstanding, but it was only on Wikipedia that we quickly found the answer to our question: when and why was Rangoon replaced as the capital by Naypyidaw. From the description, it does not sound like another Brasilia, so let us hope that the seat of government, along with peace, will return to Rangoon before we have to learn how to spell and pronounce Naypyidaw.
Again on politics, this time, the U.S. Today two respected New York Times columnists air their views on what is wrong with the (presidential) leadership and offer advice to the next leader. We hope that along with Wednesday Nighters, aspiring politicians and their supporters – and not just in the U.S. – will ponder Tom Friedman’s “9/11 is over” and Roger Cohen’s “The politics of confidence“.
It is encouraging to see someone at the helm of the IMF who looks energetic, enthusiastic and competent. As the Economist says “The energy with which Mr Strauss-Kahn campaigned suggests that he actually wanted the job and will stay in it for a while. That, in itself, is a step forward. For several years, the world’s top international financial institution has lacked effective leadership, in part because of a high turnover at the top.” This is good, especially with India urging the UN to spearhead reform of the Bretton Woods institutions
For those concerned by foreign takeovers of Canadian companies: it was announced today that TD, in the biggest foreign takeover by a Canadian lender, agreed to pay $8.5 billion for Commerce Bancorp Inc., the largest New Jersey bank. Of course this doesn’t equate with foreign takeovers of Canadian resource companies, but maybe Canada could become the Switzerland of North America – a nation of bankers, how dreary!
Meantime, we look forward to your comments on the news that Bank of Canada injected C$855 million in overnight money into markets to lower the overnight interest rate toward the central bank’s target and improve liquidity.
More on Banks: Stratfor’s analysis of President Sarkozy’s squabble with the European Central Bank over which master it serves.

For your social calendar
On a lighter – or possibly Blacker – note we remind you that the season premiere of the Rick Mercer show tonight has an appearance by a ‘self-deprecating’ Conrad Black. Not to be missed.
Another not-to-be-missed event: the screening of John Curtin’s award-winning documentary A Song for Africa at 7 p.m. Thursday, October 4, 2007, Ex-Centris (Salle Cassavetes) 3536 Saint-Laurent Boulevard. John encourages all interested Wednesday Nighters to attend.

The Report

Prelude
Two attractive and articulate representatives of their respective parties treated us to a lively and entertaining political debate, underlining how privileged we are in this community to enjoy truly civil political discourse. We only wish that they would be candidates here and all the electorate might benefit from their dialogue.
As the evening began, we were treated to Brian Morel‘s wonderful commemorative video prepared for the 25^th anniversary. Reminding everyone that many of the fine pictures were the work of Robert Galbraith, David announced that Wednesday Night will be deprived of this talent for some time as our star photographer has left on assignment to Afghanistan. Robert, who goes with our wishes for a safe and successful trip, has promised to keep in touch with e-mails, reports and photos. He will also be filing reports with The Suburban (see Beryl Wajsman’s piece on Robert).

The President’s Cup
Chil Heward, who was a Roving Marshall at the President’s Cup gave an enthusiastic account of the experience. “Phenomenal golf. I have never seen the golf course in such beautiful shape; the organizers did a great job. 24 of the greatest players in the world … anybody who saw that event will remember the very happy days in Montreal. The [only] sad thing was that the Internationals lost.” He mentioned seeing former President George Bush, looking quite frail among the VIPs, but of course the real stars were the players. “There were 30,000 people, everything well controlled. We were proud of Royal Montreal, and the City of Montreal must have made $80- $100 million as the crowds were huge. “The economic ripple effect could eclipse the Grand Prix of Canada. Seventy percent of the tickets were for foreigners – from as far away as New Zealand. “There was a great sense of pride – when they all put on the Canadiens sweaters, the crowd just roared. The world-wide TV coverage and the international community’s praise for the organization is a wonderful boost for Montreal, Quebec and Canada.” To add yet another positive note: damage to the course from the rainstorm and playing – all paid for by the PGA.

Conrad Black on the Rick Mercer Show elicited varied reactions with some feeling that it was demeaning, while others believe that it showed an endearing, seldom-seen ability to poke fun at himself.

John Curtin‘s film “Song for Africa” (in high definition) was shot in Kampala in 2005, Canada and the U.S. It follows a young Canadian music teacher from Saskatchewan and the choir’s tour in North America. The great surprise was the quality of the music and the dancing, and the therapeutic effect of the music on the group of orphans of 6-12. The kids gained so much confidence and their exuberance and joy were palpable.
[Editor’s note: We went, we saw. We cried and we are in awe.]

School Board elections and Education
Jeannette Sauvé-Frankel is again a candidate for School Commissioner in an election that includes 23 wards of which 21 are contested.
One Wednesday Nighter asks why the English School Board has been so silent on the question of access, noting that as early as June, Brent Tyler said that “The English school boards, in general, have been woefully negligent in their obligations to push access issues and had decried the Lester B. Pearson School Board’s lack of involvement in the case.” A recent Gazette editorial made the same case. The candidate responded that it is difficult for the school boards, which are strapped for cash, to speak out against the government (whence comes 95% of their financing) on behalf of a few students. She points out those members of the English-speaking community who have strong beliefs on the issue need to consolidate their own efforts.
A former commissioner supported this position outlining the problems encountered after working against the policy of the Ministère de l’Éducation.
The debate broadened to include the issue of funding of religious-based and private schools. What is key is that the public school system be at the same rate of academic excellence as private schools (Westmount High School has proven that this feat can be accomplished), then if parents wish to pay for the extras offered by private schools (better sports programmes, uniforms, art classes, etc.) they can do so, but for those who cannot afford the steep tuition at private schools, there should be a positive academic alternative.
Private schools may receive funding from Québec, but some, like Selwyn House have in the past refused funding for students in Kindergarten up to Grade 7 in order to be free from the constraints of French-language education requirements. Because all students after Grade 7 had received their primary education in English, albeit privately, they were then entitled to continue in English. Bill 104 was brought in to close that loophole. That was what Brent Tyler fought against, but the ruling in his favour has been set aside. Now it will take $200,000 to take the case to the Supreme Court; Selwyn House has joined in the case because it still has available funding under the programme that Harper has cut. One Wednesday Nighter points out that those parents who send their children to private schools that do not accept funding pay hefty school taxes none of which go to support the school their children attend.
There is increasing interest in a version that would copy the U.S. system of lump sum payments to parents who may then send their children to any school that meets curricular standards – thus the rise of charter schools
Why would one not take advantage of the “best deal in Canada” – French private school?

Politics
Despite its current problems, we are reminded that the federal Liberal Party has great bench strength. With the by-election results, the Conservative government needs only the support of one party and in the views of one experienced observer, the odds are against a fall election. Nobody, least of all the cash-strapped Liberals, wants an election. However, the Conservatives have learned from the Liberals to be united and focused, which, along with their usual success in fundraising, would likely carry them to a Conservative majority if there were to be an election.
Unfortunately, the internal struggles are replacing the Party’s consideration of real issues, e.g. How are we going to create wealth and share it equitably in the 21^st century? Also of concern are Mr. Harper’s policies of shackling the federal government by putting limits on the federal spending powers that have been so important in shaping the country.
The Liberal leadership battle is still taking place
Mr. Dion is an idea person, not a people person. Because he is so straight, he has trouble judging people. I am not sure that he really understands human nature
I think that right now, the Conservatives are the federalist party in the regions [of Québec]
My concern is the lack of Anglo leadership
Insofar as Westmount-Ville-Marie is concerned, nothing has changed since the decision many months ago that Mr. Dion would reserve this riding for an appointment. The Association has made representations for an open nomination process, but the decision does not rest with them. If voters are unhappy about the decision, they should raise their voices and make themselves heard. It is obvious to many around the table that an open nomination would encourage new ideas, interesting candidates and, as happened with Justin Trudeau in Papineau would attract many new adherents.
I think Julius [Grey] could take Westmount for the NDP with support from disaffected Liberals and his natural constituency in downtown and the McGill Ghetto
Given the lack of leadership at all levels, and based on what we saw in Outremont, it is very possible that Anglos looking for alternatives will bring about systemic change
People want to vote for real people. Tom Mulcair is a real person
If you are an elector, the best place to be is a swing riding; if you are in a safe riding, you have NO political power

The Economy (discussion ably led by Chil Heward)
The Economist this week explains lucidly why Canada’s dollar is so strong: “the industrialisation of China has boosted the world price of Canada’s exports of oil, gas, minerals, metals and farm products. But the country has also done its housework: ten years of federal budget surpluses and a current-account surplus contrast with the twin deficits in the United States. In the end it was the “subprime” mortgage woes south of the border that elevated the loonie over the sickly greenback….” Not too much cause for patting ourselves on the back. However, for the moment, the Liberals cannot attack the Conservatives on the economy.
The view from overseas is that short term, the outlook for the loonie is $1.04 – $1.06. While there are some companies that are benefiting from the high loonie, others like CAE have orders that are being taken up in USD. This is going to hurt margins for many Canadian companies. The Bank of Canada is faced with a difficult task in mitigating the bad effects of our currency’s strength.
In the U.K., the greatest worry is the geopolitical situation, with many predicting that before next year’s U.S. elections, Iran will be attacked. There is nothing that points to resolution of the situation. [Some believe that an attack on Iran would be swift and devastating, no prolonged war.] Oil could go to $120/bbl in some views with consequences for Canada’s oil exports to the U.S. and increased value of the loonie. The Americans are reflating which reminds some of events of the 1970s – skyrocketing prices for commodities including grain crops. [Editor’s note: the latter causing, as has been discussed at Wednesday Night, catastrophic effects for world food programmes).
When we talk about Canada as an oil-exporting country, we must remember that whatever we export to the US, we have to replace with imports from Venezuela for the East Coast
What is happening in Asian financial markets is “mind boggling”. Hong Kong up 4% on Monday, today (Wednesday) it is down 4%; China was up to all-time record highs last week and tonight is down 5%. The amount of money pouring into Southeast Asia is staggering. Same for Dubai, which in turn plans to push some $100 billion into Southeast Asia.
Implicit in this discussion is recognition that the West doesn’t have any money – it’s all in the hands of the Asians
The banks have been showing dreadful numbers, 1st Citigroup and UBS, announced they were writing down $9.3 billion of debt between them because of the credit crunch, but in spite of such news, the financial stocks took off.
The news that Prudential Financial Inc’s retirement unit had filed suit against units of State Street Corp seeking restitution for funds sold by State Street that suffered heavy losses may indicate that many more banks may soon be under attack. One economist suggests that the Canadian Bond Rating Agency (“I think it has furniture and fixtures”) may well be a target, but another says Canadian banks have relatively little exposure in ABC paper. There is a systemic fragility of the markets given that for every dollar of reserves, banks are allowed to lend twelve. So if $1.50 worth of creditors asks for their money, the bank would have to call in $15 worth of loans. And nobody has the money to repay their loans. The maintenance of the system depends on confidence, without it, the market would collapse.
The difficulty major law firms have is that on the one hand, we are advising holders of commercial paper and on the other, we act for all the major banks
To sum up, the situation is very volatile. Portfolio balancing is absolutely essential with what is happening in this market and there are still some excellent opportunities.