Double Blind

In his excellent Langley Township council report, January 21, 2008 edition, he has the following paragraph:

Staff gave an update on their work to improve 16th Avenue intersections, and the key findings from a report done by ISL traffic engineers. Staff are now working up both traffic light and roundabout options for 16th and 248th, and 16th and 216th, and will take those back to the public for their feedback this spring. Council voted unanimously to authorize staff to continue that process (moved by Ward, seconded by Fox). Staff prefer roundabouts, but in the end, roundabouts will only work if the users of 16th Ave. accept them. That’s why I supported sending both options back out to neighbours for their input. In the end, the people who drive that road every day need to feel safe and confident, and if it’s lights that will give them that confidence, then so be it.

This pragmatic style of governance is exactly why he should get re-elected. I don’t even live in Langley but I would vote for him if I could.

Now if the rest of Langley council wants to know users’ opinions of speed bumps on Zero Avenue, that’s another story…

Last Monday was Martin Luther King day in the USA, which is a statutory holiday just in that country. The stock markets in the USA were closed that day, but everywhere else in the world they were open and they declined significantly – down about 5% on average. When the markets opened Tuesday in the USA, commentators were anticipating that the markets were going to crash, but the US Federal Reserve kicked in and lowered interest rates by 0.75% in an emergency meeting. The Bank of Canada, in a scheduled meeting, lowered interest rates by 0.25%. The rationale in both cases is that the economy was slowing down and lower rates would provide a cushion.

In other words, I believe we are seeing the final stage of the liquidity trap that will bring short term interest rates to nearly zero in a year.

What becomes prized are cash producing assets and I suspect people that can select them will be doing well. What’s also going to happen is that the interest rates that short-term GIC’s give you will become significantly lower.

Finally, a note of financial literacy: News networks like to quote what will happen to the Dow Jones Industrial Average (usually abbreviated as the “DOW” or “Dow Jones”). You will see something like this:

You will also hear on the radio “The Dow Jones dropped 150 points today, blah blah blah”. People will use the Dow Jones as a benchmark on how the overall market is going. Unfortunately, the Dow Jones is an absolutely useless index to be doing this with – it consists of 30 companies, and while these companies are fairly large established firms (e.g. Walmart, Microsoft, General Electric, etc.) they are not representative of the entire US stock market.

A much more accurate measure is the S&P 500, which is a selection (by a committee) of 500 large companies based in the USA. This represents a much broader reflection of the US marketplace.

If the market indexes never existed until today, almost nobody would use anything like the Dow Jones Industrial Average.

There is a video going around the internet of a guy who calls himself “High Probability Trading”. As the markets were crashing last Monday, he lost about $25,000 on a single trade involving Dow futures. You can watch the video here (WARNING: there’s a lot of swearing), and you can visit the guy’s website here.

I think he will take the material offline after a couple weeks since it is really compromising. (Update: He removed the video the day of this posting… oh well, that video was one for the books, that’s for sure).

(Update again! Some guy mirrored the video and posted it here… once again, profane language warning!)

A simple analysis of the situation is as follows: He is trading Russell 2000 (an index that consists of the 2000 largest companies trading in the USA) future contracts. They are based on the value of the Russell 2000 times 100. For example, if the Russell is at 650 then if he buys a contract, and the contract goes to 660, he will be $1000 up if he sells at that price. Likewise, if the Russell 2000 goes down to 640, and he sells at that price, he will be down $1000.

So the guy bought 10 contracts at around 678 last Friday before the close of the market. When the market opened (at least around the world, the markets in the USA were closed but the future markets were open), the contract went around 653, and he was facing a $25,000 loss (which you can see on the video).

This is a pretty important video for traders out there to watch, as it is a textbook example of what not to do while trading. For example:

He learned this lesson the hard way – fortunately I never had to, I had people like this to learn from. His postmortem is quite good.

I am currently up year to date.

The head of the Bank of Canada, David Dodge, is about to retire at the end of the month after a seven year administration. Dodge was very effective in the Government of Canada, including setting policies concerning the deficit elimination in the late 1990′s, and steering Canada’s monetary policy through the 2000′s.

It is very probable that the Bank of Canada will reduce overnight interest rates by 0.25%, to 4.00% on Tuesday. The rate was 4.25% for roughly the first half of 2007 and 4.5% for the second half of the year before the US Federal Reserve started cutting rates and Canada has followed. The bank is right in suspecting that the projected US economic downturn will likely hit Canada very soon and taking preemptive action is the correct course of action.

It is also likely there will be further interest rate cuts in the future. I would suspect that there might be another rush for yield, just like we saw in the days when the US interest rates were down to 1%. This time, however, it likely won’t be in income trusts as their demise is likely once a tax is slapped on their distributions in 2011 – financially speaking, the only advantage income tursts have is their 3 year tax shield. At first glance, I’d look at the high yielders on the TSX and do some judicious cherry picking, especially since past earnings might not be represented in the future when the economy goes south.

As always, note that dividends from Canadian public corporations are tax-preferred for Canadian taxpayers due to the integration concept – this is why when you receive your $1 dividend, you report $1.45 on your income tax return, but receive a 27.5 cent tax refund federally and 17.4 cents provincially. These credits effectively amount to negative taxation for anybody making less than roughly $46,000 strictly on dividend income. If you are income-poor but balance sheet rich, it becomes patently obvious what you should be investing in.

The usual anti-gateway people are brining up opposition to the South Fraser Perimeter Road. Their concerns are mainly environmental (being along the coast of the Fraser river for most of its route and the agricultural land usage), with some straw man arguments with respect to “Trucks are unsafe”, “Deltaport is evil”, and “It won’t reduce traffic”. The proposed route roughly is along River Road all the way up the river coast until Highway 1.

I would take a contrary position – my question is – what route currently connects Highway 1 and Highway 91/99? There are no freeways doing so presently. You either have to go through New Westminster (via Front Street, which everybody knows is hell between 1:30 to 6:00pm daily) or Highway 10 (which is a mess currently due to construction but should be a bit better after they’re done) in order to reach Highway 1.

So I pose the following questions to anti-SFPR people:

1. Do you think a freeway connection to Highway 91/99 and Highway 1 is necessary?
2. If so, where if not the present route?
3. If not, how can you clear all the trucks in New Westminster / Highway 10 that are clearly trying to get to Highway 1 east? (I would add at this point that this is more environmentally damaging than having them go along a freeway).

The Bloc Quebecois are beating the election drums. This is likely due to the Bloc’s latest polling numbers which indicate if an election were held today, it would be likely that they would manage to keep about 45-50 of their seats (currently they hold 49 in the House of Commons). This is considerably better than half a year ago, when I would have had them losing about 10 of their seats, mainly against the Conservatives.

Gilles Duceppe has indicated that he will ‘wait and see’ with respect to the budget, which will be the only meaningful confidence vote in parliament, likely this March. Dion has reversed his prior “I will vote down the budget no matter what” position to “I will wait and see” a small time ago.

The cards still lie in Dion’s court – the Bloc and NDP will likely vote down anything Conservative, but the Liberals will have to carefully decide whether they want to lose the next election or whether they want to continue “abstaining” from Conservative legislative measures. Certainly the worst case for Stephane Dion is to force an election and not being able to form government – this will give the Conservatives at least another year in government (as the opposition will be hard-pressed to force an election unless if the Liberals and NDP decide to form a coalition), and will likely result in Dion’s expulsion as party leader.

I do not believe in the hype that Stephen Harper is toast if he wins another election with a minority government. I would be hard-pressed to think if another leader would have lasted this long in government with such a slim lead in seats. If the current conditions in government continue (mainly, moderate governance and a lack of screw-ups in office) it could very well be possible that the Conservative minority government will “last the distance” until October 2009. Unlikely, but a lot more possible than a year ago.

If an election were to happen today, polls indicate there would likely be another Conservative minority government. In such a case, Stephen Harper would still be around.

At the beginning of the year, fares on Translink went up. The changes can be summarized as follows:

1 Zone –
$2.25 to $2.50 (cash),
$1.80 to $1.90 (10 tickets),
$69 to $73 (after tax: $58.65 to $62.05) (monthly)

2 Zone –
$3.25 to $3.75 (cash),
$2.75 to $2.85 (10 tickets),
$95 to $99 (after tax: $80.75 to $84.15) (monthly)

3 Zone –
$4.50 to $5.00 (cash),
$3.60 to $3.80 (10 tickets),
$130 to $136 (after tax: $110.50 to $115.60) (monthly)

Now while it’s not good to be chewing a price increase, if you don’t have an automobile then there is really no choice but to suck it up, or reduce the number of trips taken. If you are a monthly pass holder then chances are you will chew the cost. Obviously there is some threshold where people will decide a car is a more efficient alternative, and I’m curious for how many people whether a 5.6% increase will do the trick. I doubt it – most automobile drivers have faced a greater than 5.6% increase in their operating costs over the past year and if anything, Translink fare increases don’t keeping up with operating costs – typically they’ve made the difference with tax increases.

Translink has increased the incentive to get away from cash fares – using 10-packs of tickets is 24% cheaper than cash fares. This was previously 20%/15%/20% for 1/2/3 zone fares. The other view is that assuming that you are taking two trips in a business day, this amounts to an average of 40 trips a month. So if you compare the cost of 40 tickets versus a monthly pass – 40 tickets cost $76 vs. $62.05 for a monthly pass. Breakeven would be four “missed” days in this case. The difference between bus tickets and monthly passes for the higher zones, is much more pronounced (6 “missed” round trip days).

My other comment is that the zone system is quite arbitrary and could use an overhaul. For example, you can take a trip from Richmond to SFU (North Burnaby) and require a one zone ticket, while crossing from the River Rock casino (North Richmond) to Granville and 70th (South Vancouver) will cost you a two zone pass. My five second fare zone recommendation with the existing infrastructure would be to make all trips along the Skytrain a one-zone pass (bought anywhere along the Translink system), irrespective of length of trip. I would also eliminate the third fare zone and require any trip that has a bridge crossing to be a two-zone fare.

I wonder how much such an implementation would cost Translink.

Stephane Dion over the past couple months has been doing a respectable job as opposition leader – he’s picking some fairly detailed wedge issues (the nuclear reactor, Mulroney) and getting as much mileage out of them as possible.

Unfortunately, Dion’s trip to Afghanistan has lead him to saying something incredibly stupid which can be summed up in this National Post article as: Let’s invade Pakistan!

Of course he didn’t mean that, but that’s what he’ll end up sounding like. Dion violated a rule of politics that Michael Ignatieff learned very quickly – never say something that can possibly be interpreted another way, especially by your political enemies.

The first line in the National Post article was:

Any attempt to counter terrorists war-torn Afghanistan will not succeed without an intervention in neighbouring Pakistan, Liberal Leader Stephane Dion said Wednesday.

Just replace “intervention” with “invasion” (as most people would do) and it’s a screw-up of monumental proportions for Dion. They are trying to find excuses to vote down the upcoming proposal in Parliament to extend the mission in Afghanistan, and by suggesting that “We should be invading Pakistan instead!” as an alternative isn’t very credible. What they really meant is that they should pull out of Afghanistan first, fix the problems in Pakistan, and then go back into Afghanistan.

If Dion is really serious about this plan, it shows that he has no concept of how military operations work in the real world.

Finally, what this will mean is that the Conservatives will drag Dion’s face in the mud on the Pakistan comment as long as possible. If the Conservatives get enough mileage on this issue, the Liberals would want to bury it and move onto the next issue, whatever it may be. Dion’s gaffe has increased the chances of the Afghanistan mission extension vote passing in Parliament (which will re-open on January 28).

A 15-seat van was driving in New Brunswick through an ice storm, and they lost control on the road. A semi-rig crashed into them and eight people died as a result. Media has been speculating that the van is unsafe and a lot of government jurisdictions have been implementing knee-jerk reactions to ban the van.

How about not driving them through icy road conditions?

Wing Commander was advertised to me as being one of the worst science fiction movies ever made. Wing Commander gives Battlefield Earth a run for its money, and it makes Armageddon look like a Discovery Channel documentary by comparison. I have no idea what Chris Roberts was thinking when he did this movie, but I could just imagine half way through production that everybody just gave up on the movie.

Take the worst elements of Star Wars, Das Boot and Battlestar Galactica and you will get Wing Commander.

This is yet another in a multitude of movies that were derived from video or computer games. The original Wing Commander were epic computer games that had sophisticated plot lines and revolutionized PC gaming. Unfortunately, this movie went in the opposite direction. I couldn’t even recommend it as a “joke” download (unlike Battlefield Earth, which I whole-heartedly recommend for this category).