Double Blind

The federal Liberals out of their last convention essentially ended up with some political talking points how they want to increase the GST up to 7%, enact a carbon tax and curtail the corporate income tax cuts.

Out of these three, the only politically palatable option is freezing the corporate income tax cuts. The Liberals would be insane to run on a platform of increasing the GST and enacting a carbon tax. They will get some traction on the corporate tax side, but mainly people from the NDP camp.

The Conservative government, in their Autumn 2007 fiscal update, enacted two major tax provisions: reducing the GST from 6% to 5% and reducing the corporate income tax from 21% in 2007 to 19.5% in 2008; 19.0% in 2009; 18% in 2010; 16.5% in 2011; and 15.0% in 2012.

This legislation was voted on and passed, so the government does not have to take explicit action to change the decrease in corporate tax rates.

The Liberals are stating that an 18% rate is good enough and that further cuts should not come into force. They have been enacted, so the Liberals would repeal the existing legislation to continue the tax cuts.

This might be good politics, but it would be a huge strategic mistake in policy.

Small businesses already have significant tax advantages (they can earn up to $500,000 in income and receive a 11% federal corporate tax rate). I believe this rate also needs to go down, but I am in a complete conflict of interest when saying this because I directly benefit from a small business tax rate reduction.

In order to stimulate growth in the economy, somebody needs to stick their head out and invest capital. When you believe you have something that can make some income, you then start looking at how much various government jurisdictions skim from the bottom line.

For larger multi-national corporations that plan on making more money, when they look at Canada vs. the USA, they will look at various costs of doing business, including labour costs and corporate tax rates.

Canada is increasingly looking like a more attractive investment option than any other English-speaking nation. Already we are more attractive than the USA, but by pushing through these corporate tax cuts, we are going to extend our lead to such a degree that much more capital will end up in this country rather than the USA.

With such investment comes jobs and increases in tax collections – personal income taxes, payroll taxes, and corporate taxes.

Business capital allocators are going to take a look at the political situation in this country and determine whether the 2011 and 2012 cuts will continue. By injecting some political uncertainty into the corporate tax equation, the Liberals might keep some business capital on the sidelines until the Canadian political situation becomes a little less risky for external investors (i.e. 2012 when the 15% corporate tax is official).

The reduction in corporate income taxes was absolutely the correct decision and will have a massive payoff for Canada over the long run. The last thing this country needs is a government that will inject massive uncertainty in the corporate taxation regime. Another example of uncertainty is Premier Ed Stelmach’s attempts to reform the Alberta oil royalty scheme – a massive failure that will probably cost him the Premier’s seat in the next Albertan provincial election.

One of the best forms of alternative energy production, assuming you can actually locate it, is geothermal production.

Once you manage to drill a hole into the ground, you can utilize the temperature difference between the ground and surface to extract usable energy. The technology is already developed and it becomes a “simple” matter of location, location, location.

The only issue with this technology is that unless if you live directly on a fault line, finding an adequate source where you don’t have to drill 100 kilometers to the core of the earth is non-trivial. Like all other power generation sources, you also have to find a way to transmit the power to the grid.

These make capital costs for geothermal power quite prohibitive.

If the private sector takes on these costs and assumes the risk of finding a viable geothermal spot, all the more power to them. It is one of the greenest sources of power.

In theory, BC should have many spots where this can be commercially viable.

Apparently some guys managed to construct a malformed website, and if you visited it with your iPhone, you would reveal your SMS (text message) database to the attackers.

I am surprised it took this long to get a public hack out – if it happened earlier, I didn’t catch it on Slashdot or the usual tech sources.

I use a very, very old cell phone and mostly use it for voice. I am reasonably confident that the only people able to listen into my conversations are government sources (e.g. police, CSIS) and the cell phone company.

With the widespread adoption of two mobile devices – the Blackberry and the iPhone, it makes you wonder what vulnerabilities are out there that haven’t been exposed to the public yet. The code in these devices are of sufficient complexity that it is very unlikely that they are perfectly secure against external attacks. Probably the best hack would be some sort of application you would download onto the iPhone that had a very good use, but had an obscure backdoor which enables leakage of information from the phone without the client’s permission or knowledge.

This post is cross-posted with BC2013.com.

Today, the provincial government announced their plans for BC Place.

The quotation I will focus on is the following:

The facility is expected to generate up to $130 million in gaming revenues that will be distributed to the Province in the first full year. Pending City of Vancouver approval, Edgewater Casino will be relocated as part of the rezoning process.

I am very curious to see whether these gaming revenues will actually come to fruition. The reason is because gambling expansion in the Lower Mainland has quickly become a zero-sum game: casinos that open can only obtain revenues that would have went to other sources (e.g. other casinos, Lotto, online gaming).

Surely an expansion of the casino will lead to some incremental revenue generation, but my question is: Will $130 million in gaming revenues be realized, and if so, who’s revenues will be sacrificed as a consequence?

My initial gut instinct would suggest that River Rock Casino (Richmond, BC) would be the largest negative stakeholder in this decision, with the newly-built Grand Villa Casino (Burnaby, BC) being a close second.

I was listening to CKNW and there was an advertisement about somebody saying how they feel good about paying more for energy. It is part of a marketing campaign by Bullfrog Power.

It is one of the most unusual marketing campaigns I have ever seen in that they don’t even pretend to say it will save you money. They instead give the environmental argument that you can source your energy from green producers and give you the impression it is great to use power since you are no longer harming the environment.

I will discuss the mechanics of this scheme.

In British Columbia, essentially what happens is that you will receive your bill from BC Hydro and you also receive a bill from Bullfrog at the cost of 2 cents per kilowatt hour. BC Hydro uses a step-rate system, so depending on how much energy you use, your cost will vary. If you use less than 1,350 kWh over 2 months, you will pay roughly 32% more. If you consume double that, your bill will rise by about 27%, and if you use a ton of power, your bill will rise about 23% over what you currently pay.

The energy is sourced from Bear Mountain Wind Park, which is owned by Altagas, a publicly traded income trust. The park produces 102 megawatts of peak power, at a capital cost of $200 million and is British Columbia’s first completed wind park. It is located near Dawson Creek in the northeastern part of the province. It also has a 25-year contract with BC Hydro to sell power to it.

Once the wind farm produces a joule of energy, it will distribute it to BC Hydro. The energy is then distributed to those that are hooked up to the power grid, and those people are billed accordingly. Altagas will receive money for the power it delivers to BC Hydro. People who subscribe to Bullfrog will also receive a bill in the mail. Presumably Bulldog has an agreement with Altagas that both companies will split the proceeds according to whatever agreement those two companies have.

The point is that purchasing energy from Bullfrog is just like purchasing long distance service from a calling card company – it does not change the productive capacity of the system whether you purchase the power or not. In other words, the “green energy” argument is nonsensical – there is no environmental benefit from purchasing power from this provider because the power you receive is still from the whole grid and not just a wind farm.

Just to prove this point, there will be points in time that there will be no wind flowing through the Bear Creek Wind Farm. At these moments, will your lights shut off? No – you are still connected to the main grid.

I will never go for this since I think the whole concept is farcical, but I find the whole concept to be rather innovative. It will not, however, do anything “green” since wind power is parasitic to the rest of the grid. You will, however, be enriching Bullfrog Energy and Altagas, of which I’m sure Altagas’ unitholders will be quite happy if you did fork over the 2 cents per kWh.

If you truly believe in the future of “green energy”, one can express their appreciation more effectively by investing in companies that engage in such projects instead of buying into marketing schemes that will have no net effect on the environment.

The quick soundbite is the following: Bullfrog Power is in the business of selling environmental indulgences.

If I end up dying of a heart attack one day, it will because of one reason: Nutella. I love the stuff, but I somehow manage to restrain myself to a couple Costco-sized packs a year.

That said, one of the most annoying user interfaces on this planet deals with how to extract the last bit of Nutella out of the jar. Nutella, in Canada, has a 750 gram container in bulk quantity. You extract the contents out of the jar similar to how you would extract peanut butter – usually with a knife, sometimes with a spoon. You eat whatever you spread the Nutella on and then feel very good about life. It is cheaper than most schedule 1 drugs, less addictive, and legal.

The user interface problem occurs when the quantity of Nutella runs out – you have to scrape the side of the jar with a knife, and it is a very inefficient process in removing all the Nutella out of the jar. Usually a lot of the Nutella ends up on the middle of the knife (not the end of it) and makes it very difficult to spread on bread. In addition, some of the Nutella ends up on your fingers. By the time you are done extracting enough quantity and cleaning up your hands, your toast has already gone to room temperature.

I am wondering – why can’t they make Nutella in toothpaste-type containers? Surely it would be more efficient in terms of spreading and also not having to deal with the annoying “last bit” problem – getting the last bit of toothpaste is much easier than out of Nutella jars.

I finally bit the bullet and registered for the Sun Run before I forgot another deadline. It is $40 to register until March 31, and then after it is $45.

Week 19 consisted of two training sessions, three days apart each. Week 20 started today, and I am planning on getting back to my Monday-Wednesday-Friday routine and build up some endurance by extending my runs out to the 45 minute level. I have currently been doing 30 minute runs to try to keep up my body’s stamina, but I need to build onto this otherwise I will run out of gas in the real race.

There isn’t anything too terrible to report, although I certainly do not feel like I will be able to beat 56 minutes. There are seven weeks left to train.

There is going to be a very interesting retail shopping battle that will be emerging in Chilliwack – mainly Superstore (owned by Loblaws) vs. Walmart. It is not easy to predict who will win this battle other than the consumers.

Currently, Superstore provides groceries, gasoline, clothing and housewares, basic electronics, and a drugstore function. It is effectively a “one stop” shop for basic necessities. There are some areas where it falls flat (e.g. I generally purchase my meats at Fraser Valley Meats), but generally the store is very competitive concerning price, quality and variety. Its location is just south of Highway 1 on Luckakuck Way, which is fairly central to most of Chilliwack. Indeed, it is very close to the exit that most tourists from Vancouver go to take a break, get gasoline and groceries as they continue their journeys into the interior.

The store is kept quite clean, and the staff that they have there generally look like as if they actually want to work there (compared to the Richmond location, where the staff mostly look like they have depression). I have also had some fairly positive customer experiences there – the most notable time was when I had purchased a bunch of items, and forgot to bag one of them (a smaller, more expensive item) when leaving. I realized this when I got back to my place and called in and they stated that they log items that customers paid for but didn’t pick up. I went over and picked it up from the customer service counter after showing the receipt.

Perhaps more important than a one-off story is how long it takes to purchase groceries and it is my experience that the “express” (12 items or less) lines typically involve waiting less than a couple minutes to process your purchases.

The vast majority of my grocery expenses, and increasingly household/drugstore expenses currently go to Superstore in Chilliwack.

Walmart in Chilliwack is also located very close to Superstore – it is just south of Highway 1, but west of Vedder Road. While not directly competing against Superstore by virtue of the fact that they do not offer most groceries, they will be going into competition with Superstore shortly, but not in their present location.

I generally find myself in the Chilliwack Walmart once every two months or so and over the past year or so have found that most of the stuff offered there can be found at Superstore. The store is also connected to a mall which has a independently operated bakery, a bunch of stores selling miscellaneous stuff, a small food court, and a Safeway.

Probably the biggest problem I have with the Chilliwack Walmart is that it takes forever to go through the checkout – although there are plenty of spaces for cashiers, usually only two or three of them are occupied and it takes forever to get through. I do not like waiting a long time to give somebody else the privilege of taking my money.

In my opinion, the Chilliwack Walmart cannot compete against Superstore.

With the construction of an interchange and overpass at Evans Road in Chilliwack, this had made more easily accessible land from the Squiala First Nation which is a relatively small band and an enclave inside the boundaries of the City of Chilliwack.

The Squiala have partnered with a real estate development firm (League Assets Corp) to open up a retail center on their reserve, with the feature tenant being a 150,000 square foot Walmart Supercenter, presumably replacing the old Walmart in Chilliwack. In the original press release they were aiming for an end-of-2010 opening, but I am not too aware of how far the development (under “Eagle Landing Retail Group”) is proceeding.

I do know that Eagle Landing Retail Group is looking for about $25 million in funding and are actively soliciting for money in their partnership.

Walmart Supercenter, for those that have never been to one, is a very large version of Walmart, selling practically every consumer good you will ever need, short of an automobile. Most notably is that they have a supermarket section which will heavily compete with Superstore in Chilliwack. Vancouver (at Grandview Highway at the former Costco site) is the only other location for a Walmart Supercenter that I know of in BC and I have never been there.

It will be very interesting to see what emerges out of this. Walmart’s only problem is that their new Supercenter is relatively out of the way – although Squiala is located fairly close to Chilliwack, the drive to get there is a bit obtuse from the south side of Highway 1. From the north side of Highway 1, the planned expansion of Evans road to connect to Ashwell needs to be performed – otherwise people that live on the north side of Highway 1 in Chilliwack will need to take a longer drive to get to the Supercenter. The issue with an out-of-the-way location is that one typically goes to other places during a drive and thus the Walmart must have a ‘destination’ type feel to it.

The Eagle Landing Retail Group center will have other tenants as well – apparently Cinaplex is opening a movie theatre in the area. Home Depot is apparently going to be another tenant. Depending on what other tenants move to the complex, this will reduce the location risk for Walmart.

The geographical problem is a moderate consideration and there should be heavy competition for the household retail dollar – it will be very interesting to see if the market will be stable, or whether a community the size of Chilliwack can support two very heavy players.

My quick guess at this time, however, is that Superstore will continue to dominate because of the geographical factor, although I would suspect that Walmart would siphon off a lot more of the Vancouver to BC Interior traffic than local traffic.

The Revelstoke avalanche incident is an interesting exercise on the argument of freedom vs. protection of the public. To summarize the story, a bunch of snowmobilers were snowmobiling on a mountainside near Revelstoke, even though they were told the avalanche risk was very high. They continue to do so anyway, an avalanche occurred, and the subsequent rescue operation managed to save most, but not all of the people involved.

Now there is a media firestorm whether this sort of activity (snowmobiling) should be banned or otherwise regulated when there is “high risk”.

One can make an argument that you should be free to do whatever you want, even if your activity could be risky toward yourself and your activity doesn’t endanger others. Do we want to discourage all risk-taking activity in society? A lot of sports, for example, have an element of risk that some will consider unacceptable.

Or should activity be banned in areas where the risk of death is considered to be “too high”? Good luck defining that in the legislation that would be required to make this happen.

Essentially the question boils down to how much we want government to be protecting people from their own risk tolerance. Some people will have risk tolerances much higher than the average bar the public sets – you always hear of the stories about the skiers that go out of bounds. Will laws prevent it from happening?

My general approach to matters has always been towards making laws less complicated (or even better yet, eliminating them). As a result, I would be in favour of just billing the people for the rescue and leaving the matter alone.

… the easiest piece of legislation that I would change is to get rid of the penny. You can still have transactions go to penny increments, but when paying and receiving cash, round the price to the nearest nickel.

A close second, however, is getting rid of daylight saving time. The whole concept is pointless in the 21st century. I find this twice-a-year clock changing to be patently absurd.

Also, snap quiz: Are we now in the Pacific Standard Time or Pacific Daylight Time zone?

I bet you if you surveyed enough people, it converge to 50% for each response.

The answer (at least for a person living in southwestern BC) is Pacific Daylight Time.