Day: November 11, 2010

New China Investment in Canada

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Well good news to investors comes today from an agreement between Ottawa and Beijing to allow Chinese insurers access to the capital markets in Canada, which would bring in potentially billions of new dollars into the TSX and the Canadian bond market; this will undoubtedly help push up asset prices in our relatively small market, as the Chinese seek to diversify their holdings out of US Treasury instruments.  The Finacial Post says:

The China insurance pact comes on the heels of the decision by Ottawa to stop a proposed bid by Australia’s BHP Billiton Ltd. to acquire Saskatoon-based Potash Corp. The ruling sparked widespread worry among policy experts that Canada would find it difficult in the future to attract foreign investment, which is required to help boost innovation, domestic competition and lacklustre productivity.

The Financial Post suggests this is welcome news in the light of recent events. The Canadian journalist community had convinced themselves that the failed Potash bid of Australian mining company BHP would send a negative message to foreign investors.  However, according to a very thorough article in the Globe and Mail on the failed deal, the fault lies entirely with BHP, starting with their low-balling the initial bid, making it so that neither the Potash board of directors nor the province of Saskatchewan were much interested in the offer.  In other words, if you want Canadian assets, you better be ready to pay a premium for them, and that is as it should be.  The BHP bid of $130, though 20% above the price of the day of the offer, was ridiculously below POT all time high over $244.

In my view, this is another reason to be bullish on the Canadian oil and gas sector.  In China, there is a growing demand for energy and a diminishing stock pile, as the WSJ has pointed out (hat tip Devon Shire).  I believe that the Chinese insurers will seek out energy stocks as one of their main interests, as they know their own demand for the products will continue to force up the price.  Meanwhile, there are still deals to be made in the TSX.  For example, Petrobakken has made a serious dip since its quarterly report, as investors were disappointed with less than spectacular results caused  by wet weather which hindered drilling.  Penn West Energy and Pengrowth Energy are both dipping, having both been downgraded by TD Newcrest from Action Buy List, to Buy–based only on their recent, dramatic increase in share price.

Wine as currency

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During difficult economic times, it is often the case that hoarding becomes illegal.  It is punishable by severe fines. In Weimar Germany a law was even passed against gluttony.  Today, the USA faces a serious threat of hyperinflation.  During hyperinflation, paper money becomes worthless and unhelpful in exchange.  Therefore, people resort to bartering goods and services.  Bartering is a form of commerce that is frowned upon by government because it can’t be taxed.  If I fix your plumbing and you fix my roof in exchange, each of us spending three hours to do it, we’ve exchange services but there is no money,  no paper trail, and no receipt.  Two normally taxable events are reduced to zero tax.  So a doctor treats a lawyer’s son and the lawyer draws up the doctor’s will.  Neither reports the activity to the government and no money passes hands. It is just a friendly transaction in an underground economy.

I believe that hyperinflation is an inevitability in the US, and unfortunately here in Canada, there is going to be high inflation.  In such times, it is useful to build up a store of silver or gold.  But personally, I’ve decided to store up something that I could potentially barter.  I have been making wine from concentrated juice, grape juice and from grapes since 2004.  My wines are pretty good; I’d say the equivalent of at least a $10 CDN per bottle at our local provincially control liquor stores (called the LCBO-the Liquor Control Board of Ontario).  Wine is a controlled substance, and so I am not allowed to sell my product without a license.  But when times are desperate, and money is worth nothing, I figure that I should be able to barter bottles of wine for food or other goods and services that I might need.

So I’ve decided to stock up on wine kits.  These kits are $70 for two at Costco, or $45 for one at my local supplier. Each kit contains concentrated juice that will make 30 bottles. I know that the juice remains usable for at least two years maybe more. Once made into wine, the wine can be aged another two years.  It is not certain how long the wine will last after that.  So my minimum cost base will be $1.17 per bottle plus my labor (which isn’t worth anything). If I buy 10 kits at Costco at a price of $300, I’ll be able to hoard 300 bottles of wine in reserve.  This would give me $3000 worth worth of goods with which to barter, and the product itself has an indefinite shelf life.  I estimate that it would be about the same as buying two one-ounce coins of gold, at a cost of $300 CDN.

The great thing about alcoholic beverages is that they do not lose their “currency” in times of depression.  Indeed, people feel the need to celebrate or to drown their sorrows even more during economic hardship than during the good times.  If the economic crisis never comes to Canada, well I can consume my product or give it away as gifts.   Or if the crisis comes and I am unable to barter the product, my wife and I could consume the wine for the calories and it will stave off starvation for a moment.

Sarah Palin’s dead lake: her god-like ability to influence things before she was born

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N.B.:  I was having this discussion at City of God with Sarah-Palin detractor who has taking aim at Craig Carter, a friend and one of my favorite bloggers. I was doing some research and found this:

Gov. Sarah Palin, former mayor of Wasilla, killed Lake Lucille.  This is according to piece by Salon’s founder David Talbot, covering the 2008 presidential campaign, “Sarah Palin’s dead lake: By promoting runaway development in her hometown, say locals, Palin has “fouled her own nest” — and that goes for the lake where she lives“);  as evidence, he cites a local assembly member:

“Lake Lucille is basically a dead lake — it can’t support a fish population,” said Michelle Church, a Mat-Su Valley borough assembly member and environmentalist. “It’s a runway for floatplanes.”

I grew up in Anchorage.  We passed Lake Lucille hundreds of times on our way to our cabin at Crooked Lake which is only about 30 minutes from Wasilla on South Big Lake Rd.  Assembly woman Michelle Church describes an all-too familiar scenario, a lake with lousy fishing, and suggests that that it is directly caused by float planes.  Our own Crooked Lake 40 years ago was by no means crowded with float planes; but the couple dozen families with cabins there fished it regularly with hardly any success.  Some lakes just don’t have good fishing.  We also used to fish Upper Russian Lake near Cooper Landing.  Now that was heaven for Rainbow Trout fishing.  Upper Russian Lake, situated between mountains is deep, cold and rocky, with little vegetation.  It avoided over-fishing because its access was by float plane or by a 12-mile hike through grizzly country.  Crooked Lake is warm and shallow with a lot of vegetation and sticklebacks, but trout only thrive in cold, highly oxygenated water.  One summer at Ontario’s Lake Opeongo I caught a 2 pound trout from my canoe but only after letting out hundreds of feet of line–I’ve never repeated that again.  Most summer trout fishing south of Alaska requires special rigging which holds the line 90 or so feet below the surface where the water is sufficiently cold.

Did Sarah Palin foul her nest (a distinctly misogynist slight) and make it impossible for fish to live in the lake?  Here is an excerpt from a 2009 article that explores a little bit of the history of the lake (Anchorage Daily News):

The state Department of Environmental Conservation has for several years called Lake Lucille an impaired water body because vegetation chokes the shallow pool and its decomposition robs the lake of oxygen.[snip]

According to an account published as part of a 1993 study by Anchorage engineering firm Hattenburg, Dilley and Linnell, rotenone, a poison, was added to the water in 1955 and 1963 to kill stickleback that had invaded the lake.

The treatments killed an estimated 25 million stickleback, along with 80,000 suckers, 450 rainbow trout and 235 silver salmon. A fish weir was added in the late 1960s to stabilize the lake levels and keep the stickleback population in check.

Measures have been taken to improve the lake’s water quality as well… [snip] But the lake is still choked by vegetation and doesn’t have enough dissolved oxygen.

Sarah Palin was apparently born in 1964, and her family doesn’t seem to have moved to Wasilla until 1972.  So she could be the cause of Lake Lucille’s death only if she has god-like powers to influence:

(1) the structure and nature of Lake Lucille, i.e., shallow with a lot of vegetation;

(2) events that occur before her alleged date of birth.

Perhaps she is an immortal alien from another planet or an überterrestial.  But it seems more likely that Salon founder David Talbot is not a journalist but a propagandist.  It took me less than five minutes of internet research to debunk his tendentious article.