Wednesday Night #1457

The economy, currencies and markets
The declining value of the euro versus the U.S. dollar and the emergence of virtually debt-free nations in Asia have significantly changed the world financial pecking order, although it is still in flux.  The euro is falling against the U.S. dollar;   there are very attractive investment opportunities in consumer products as consumer demands rise dramatically in India and China.  2009 has proven to be a fantastic year for investors in India and China, the problem in both being excessive borrowing in order to invest.  The nine percent growth in China in 2009 is expected to decline to eight percent, with no inflation.  Debt free Asian countries with their clean balance sheets represent a striking contrast to debt ridden North America and Europe and they have become the repository of the world’s reserves.  Unthinkable at other times, Québec is currently contemplating entering into the field of online gambling in order to reduce its debt, causing some to fear that the privatization of Hydro Québec, symbol of the coming of age of that province since the days of Réné Lévesque might be the next step if the ballooning provincial debt cannot be otherwise contained. A surprise war might change the scenario. Iran, China, India are political flashpoints and the U.S. is no longer in a position of control.

The Canadian and Australian currencies are strong.  With the Asian market expected to enjoy three times the growth in North America, Australia is especially physically well located to profit from that market growth.  In South America, Brazil, Argentina and Chile are doing well, providing commodities to Asia.  Following the January market correction with energy and banking sectors especially affected, some recovery is expected in Canada, in February.  Increasing dividend yields are providing investment opportunities.  Dividends should be a more important criterion for investment this year than growth.  Some growth is anticipated in the Canadian economy with little or no inflation.  President Obama’s executive order effectively including Canada in the American trading zone should enhance Canada’s prosperity this year.The Market enjoyed an excellent half of January despite the selloff in the second half of the month.  We currently enjoy a rally but are anticipating another drop, following which the rest of 2010 is expected to prove very profitable for the market.  The current market decline should end by the end of March and the big bull market will follow.  The metals will rebound towards the end of the year.  With the recovery, the Canadian dollar will be approaching par with the U.S. dollar and may very well even reach $1.10 to $1.12 within two to three years as commodity prices rebound,

Tar sands
Despite developing public concern over the increasing importance of the Alberta Tar Sands, as is frequently the case, economics will very likely trump ecology in their further development.  The debate sees the evolution of a cleaner harvesting of the tar sands through technology with the proponents pointing to the need in Saskatchewan to prevent petroleum production from destroying its important agricultural sector.  Proponents of the further exploitation of the Tar Sands point to what they believe are the inevitable advanced technological methods of extraction, notably the current movement to in situ extraction as the answer to fears about the ecological damage.  Opponents cite the ultimate inevitability of Exxon Valdez-like disasters in transporting petroleum in addition to pollution problems in extraction and overland transmission, pointing out the impossibility of recuperating more than twenty-percent of any oil spill. Further, there is the effect on marine life of sunken tankers around the world that have not had the publicity of the Exxon Valdez and the very real concern that the resulting disappearance of free swimming marine species will have a hugely detrimental effect on  all life on the planet.  They would rather see the current investment in cleaner oil sands extraction  spent on the development of such other energy sources as nuclear, or solar energy reflected in the form of microwaves from the moon.  Biogas, favoured by many, has the disadvantage of requiring a large land area.

President Obama in the wake of the election in Massachusetts
Senator Edward Kennedy has proven to be President Obama’s canary, his death foreshadowing decreasing support in traditionally strongly Democratic Massachusetts.  The President has made incredible strides in the face of a hostile senate, a devastating financial crisis and powerful self-interest groups. However,  an intelligent, sincere leader requires more than rhetorical skills, perhaps the communication skills of a Ronald Reagan that might have the capacity to inspire the national confidence, so diminished in the U.S. at this point.

Canada
Canada continues to mirror the United States in many ways.  Prime Minister Harper has seen his popularity plummet inexplicably [Editor’s note: NOT inexplicable to some!], following the prorogation of parliament, which was suspected to be the prologue to a federal election.  If true, unfavorable public reaction to the Prime Minister’s action has unexpectedly short circuited his plan to follow it up with a sudden election call.  It is possible that the election call might come next year following the recovery of the economy.  This year, prior to the recent public disillusionment with the Prime Minister, election of a majority Conservative government seemed almost inevitable.  The Liberal party remains in disarray but some Wednesday Nighters believe that the fortunes of that party are dependent on the date of the next election, with the solution to Liberal Leader Michael Ignatieff’s problems being time dependent.  Mr. Ignatieff’s problems appear to be due to the divisive nature of the Liberal Party today.  Canadians, more particularly Quebeckers, are basically tired of the Prime Minister.  By next year, however, as the economy improves, they may very well reconsider their attitude.

 T H E  I N V I T A T I O N

“The Day the Music Died” – 50 years ago on February 3, Buddy Holly, Ritchie Valens and J.P. “The Big Bopper” Richardson were killed in a plane crash. The event as many remember was immortalized in the Don McLean song “American Pie” whose refrain stuck in our heads throughout the early ‘70s.

We understand that the Groundhogs – Willie, Phil and Sam – have spoken and there will be six more weeks of winter. This may come as a surprise to our southern neighbours in Punxsutawney, PA, but if we were blessed with only six more weeks, we would be delighted. (Did you realize this tradition is 122 years old in the U.S. and actually dates much further back to Candlemas in Germany, but it was hedgehogs, not groundhogs in the early days.)

Last week’s highly informative and lively session on the situation in Haiti and long-term development issues was so absorbing that the State of the Union message only served as a muted backdrop to the evening. Hence we propose to examine it in the light of the widespread criticism of what we thought was an excellent speech. This will also afford us the opportunity to incorporate commentary on President Obama’s new budget, about which at least the New York Times’ editors are rumbling approvingly We are always amazed by the rapidity with which pundits and editorialists are able to form judgements on major issues, so hope that our favorite Wednesday Nighters can help us with analysis and constructive criticism.

In $3.8 Trillion Budget, Obama Pivots to Trim Future Deficits
President Obama’s proposed budget would bring this year’s deficit to nearly $1.6 trillion before seeking to lower annual deficits over the next decade.
Mr. Obama made plain that he is standing by his [priorities], undaunted by either the legislative setbacks of the past year or the sluggish economic recovery. [It] incorporates his signature proposals to overhaul the health care system and energy policies, though they are languishing in Congress. Education, civilian research, food and drug safety and biomedical research would all get more money. For NASA, Mr. Obama proposed to cancel plans to return to the moon but sought $18 billion in spending for new technologies that could take humans farther into space.

Meanwhile, while we wait with bated breath for our March 4 federal budget, Mr. Flaherty has upped the estimate for growth in Canada, reversing the September forecast figure of 2.3 to a new figure of a 2011 peak of 3.2, and without additional stimulus money. However, unemployment at 8.5% – Comments anyone? Marc Garneau has good suggestions for improving the economy, asking Where is Canada’s plan for the digital age?

Regarding the budget, Terence Corcoran is running an entertaining column “The chopping block” seeking ways to eliminate a mere $20 billion of structural spending. Anyone can play; he encourages suggestions, although we don’t think you will earn a percentage of the savings.

Oh! Nobody has mentioned Mr. Harper and nor have we heard anything from him since he was at Davos, where his keynote address advocating ‘enlightened sovereignty” [Kimon, we need you!] was variously described – in the same publication, no less – as underwhelming and statesmanlike.  Where is Mr. Harper? Hiding from the anti-proroguers – who have proven to be more vocal than expected? He is invisible in the increasingly angry/nasty/murky storm blowing around Rights & Democracy; and his Minister of Environment is picking fights with the Quebec government. His latest attempt at Senate Reform has been to announce (by remote control) the appointment of five new Conservative senators. So where has he been since Davos? Resting up for the Olympics?

Another topic we have not discussed – and which temporarily wiped almost everything else off the media map – the new iPad, which the National Post giddily refers to as the closest we’ve got to a Hitchhiker’s Guide to the Galaxy – like all other much-heralded products in the wired world, it has its fans (including Stephen Colbert) and its critics. Not a major preoccupation for Canadians at the moment, as it’s not available here and nobody knows when it will be or how much it will cost.

Far less technical, but more relevant to those of us who feel nickel and dimed to death, is the statement by the gentleman who rejoices in the title of Canada Research Chair in Tetherless Computing at Waterloo University (we are NOT making this up) that it is Time to retire touch-tone fee. Amen – even if it is only $2.80 a month.

There is still bleak news from Haiti, as many wait patiently for relief and security concerns increase Fundraising efforts continue, led by the amazing Hope for Haiti Telethon and now a 25^th anniversary version of “We are the world” which will be launched on the opening night of the Vancouver Olympics (yes, Céline is one of the contributors), but on the ground, the situation continues to be truly heartbreaking.

While all eyes were focused on Haiti, Iran executed three purported protest leaders and there are more executions coming. There is news of a nuclear deal, but many in the west are sceptical.
“Chemical Ali” was finally dispatched to the netherworld, and violence is increasing in the run-up to Iraqi elections, with a particularly horrific attack on Monday. On a much more cheerful note, we gratefully acknowledge the piece on the return of salons to Bagdad, forwarded to us by our Vancouver Salonista, Alexandra, who with her usual energy is preparing the February 10 iteration of the West Wing Salon, with the following topics:

• In praise of machines: We find it easy to critique our industrial-consumer life, and the automobile has become a symbol of all that is wrong with progress (or as one of our regulars often reminds us – symbol of the lack of progress). What then do we love about the world of machines?This being so close to Valentine’s day, come prepared to make a case for the machine you LOVE the most, be it the bicycle, canoe, train, avocado slicer, egg-beater, i-phone or dare I say internal combustion engine.
• The paradox of choice and the role of wisdom – have a look at these short TED Barry Schwartz videos http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice.html and – http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice.html – lots to delve into!
• Under-reported news: Where do you get your news? What is the media failing to report? What do you think are our blind spots as a society? What are the trends, issues, news events that we should be focusing on?
• Reconstruction in Haiti: Have we learned about where best to send our support? Are celebrities who travel to Haiti help or hindrance? Who should direct the effort and control the monies?
• And yes, we can also mention the Olympics! – there are incidentally still lots of tickets to be had at the Cultural Olympiad – www.vancouver2010.com/cultural-festivals-and-events/