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#1322 4 July Page 2
Introduction
Terrorists in London
With the exception of absolute dedication of both human and presumably, divine support to the validity of a cause, the nature of warfare has changed. No longer do opposing armies face one another on the battlefield for territorial gain. Until now, civilian populations, with the possible World War II exceptions of the bombing of Coventry and Dresden, have not been deliberate targets of aggressive military action. It is for this reason that the attempted targeted destruction of large numbers of civilians in the U.K., most of whom would have been women, should be cause for concern. The fact that the attempted bombings were to be carried out not by the underprivileged, but by well-educated individuals from upper middle class families, and all working within Britain’s National Health System, is of particular concern. It underscores the dramatic change in the type of individual who is now a militant.
[Editor’s note: The unexpected profile of the modern terrorist: 26, from a caring family, married, with children, graduate … For an excellent and thoroughly disquieting dissection of the “second wave” of Al Qaeda militants, we recommend timesonline.co.uk /crime/]
This phenomenon is not new, considering past threats in the U.S. by the Black Panthers, Ku Klux Klan and communist cells. However, the religious nature of the current threat and the apparent disregard by the perpetrators for their own personal safety indicates that traditional responses constitute an inadequate reaction to these threats. Whatever the ultimate goals of Al Qaeda and its associated groups, one inescapable factor is the repressive attitudes towards women thus reducing the potential of those societies by 50% wherein one half is not contributing to their development. Once women in those regimes are educated, the economy improves, the birthrate drops and the fundamentalists lose power.
Should western countries under threat be putting more pressure on the nations harboring terrorist groups? Could this be effective given that often these countries (i.e. Saudi Arabia) are subject to not one but two governments, namely the secular and the religious and it is not unusual that one (secular) may be friendly and the other inimical to the West. It has been suggested that the press is sometimes guilty of sensational reporting of perhaps managed, mundane events.
5 July 2007
Terrorism is no longer much of a “black swan” event for markets
CAR bombs are placed in London and Glasgow airport is attacked; Britain's terrorism-alert status moves briefly to the highest level, suggesting another attack is imminent. So how does the stockmarket react? The FTSE 100 index fell on July 2nd, the first full day of trading after the Glasgow incident, by a measly 17 points.
The western world, especially the U.S. is the subject of admiration and disdain by those segments of the population that either aspire to western religious, intellectual and personal freedom, or fear its proliferation.
Dr Louise Guay Founder on My Virtual Model Inc. Wed1322 5:30
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Manufacturing, the word derived from ‘making by hand’, was once dreaded as the instrument of eliminating variety from the goods offered for sale, a fear never realized as, in fact variety increased with mass production. A Québec innovation, virtual modeling, through computerization of individual body size, shape and form, carries personal choice a step further. Through this medium, clothes can be selected that fit and match one’s shape and personality, make-up and hair styles can be tried on the virtual model, all leading to the possibility of allowing people to visualize the consequences of today’s decisions on savings and therefore their lifestyle in retirement and old age, and thus to embrace proactive financial planning. The use of the virtual model generally leads to more honest presentation of the individual and thus could enable better decision-making. Young people are also attracted by the possibilities that this evolution of MVM Bio
In collaboration with Université de Montreal’s HEC and the Media Lab of MIT, MVM is organizing the 2007 World Conference on Mass Customization & Personalization (MCPC) this October 10-12. Bridging between academic research and management practice, the conference provides an interactive platform to learn about mass customization strategies and to discuss the latest technologies and enablers. It will start at MIT in Boston, with Extreme Customization an interdisciplinary focus on the new advances in the field. The second part, a business seminar - Extreme Make Over of Retail - hosted by HEC (Hautes Études Commerciales) of l’Université de Montréal, will address opportunities to bring mass customization and personalization to retail.
Dr Louise Guay Talks about MCPC Wed1322 2:47
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Pension Funds
Financial projection is not always linear and projection of the past is not always a reliable indicator of the future. While corporations may sometimes view pension funds as an unnecessary expense and waste of capital and employees, as a guarantee of a comfortable lifestyle in retirement, neither is necessarily the case. In addition to the financial skills of their guardians, most pension funds are heavily invested in bonds hence their relative financial health is dependent on variations in interest rates. Human lifespan is increasing at an unpredictable rate and increased productivity, shorter length of employment at a given job and technology may reduce numbers of contributors to a given pension fund.
Many pension fund managers in Canada are very worried. Long-term interest rates will be rising, but not by much. The typical pension fund here is about 40% bonds and 60% stocks. The only way pension funds will survive without difficulties is if the stock market performs well. Therefore, the need to find new strategies to compensate, one of which is investment in infrastructures with more stability (airports, seaports) and regular cash flow. In Québec, there is a fear amongst pension fund administrators and board members of devastating lawsuits, causing them to be overly cautious in their decisions.
In the U.K., a pension protection fund has been established as well as the position of Pension Regulator, who, when necessary, is involved in takeover bids of companies in financial difficulty. There has been a constant shift from defined benefit to defined contribution plans resulting in much lower contributions by employers, resulting in less satisfactory pensions for employees down the road. There has been a noticeable increase in activity by pension fund administrators at the board level.
The economy (see also Jacques Clément’s Report on the economy)
The stock market is expected to increase over the summer, (15000 on the TSE) with a significant drop this autumn, followed by the next bull market. With the increase in private equity financing, mergers and acquisitions at a record pace, also leveraged buyouts, the central bank must cool things off. Although it is likely that there will be criticism, the Bank of Canada is likely to tighten monetary policy on July 10 by ¼% to 4½%.
The search for David Dodge’s successor continues, with one new criterion added: he [we have seen no suggestions of female candidates] must have excellent communications skills. Although possible candidates include: Kevin Lynch, former deputy minister of finance and now chief clerk of the Privy Council; senior deputy governor Paul Jenkins; former senior deputy governor and now head of the Bank of International Settlements, Malcolm Knight; deputy governor Tiff Macklem; and senior associate deputy finance minister Mark Carney, it would not be surprising to see a candidate from the private sector. One reason for this is the questioning of the accuracy of the economic forecasting from the Bank of Canada.
Emerging markets are expected to decline over the next few years.
India, China, as well as other countries, are currently building reserves of petroleum, nickel and copper, boding well for Canada as a major supplier in that area of the market.
There are some reports of changes in Canadian laws governing capital gains. Possibilities are the total elimination of capital gains tax, which contributes only about 3% of the government’s revenues, with, possibly, an offsetting increase in income tax and/or the delay in tax on capital gains until death.
Impact of rising oil prices on inflation and lifestyle
The fuel market is [so far] a very flexible one with price increases absorbed with little or no reaction or decline in sales. Petroleum prices are expected to continue to rise, while the price of natural gas is declining. Other than the rising prices of transport, food and plastics, the inevitable increase - and decline in oil supplies - may well have an unpredictable [Editor’s note: not unpredictable if one has seen The End of Suburbia] ultimate effect on such things as urban sprawl, transportation to and from work and changes in choice of investment of public funds on mass transport, or perhaps, ultimately, greater conservation and the development of alternate energy sources, including the development of nuclear energy.
Nuclear energy
The Economist recently carried a piece on the split of the environmental movement which indicates that despite long-standing solidarity on opposition to nuclear energy, many environmentalists are now agreeing that, provided certain safeguards are ensured, it is the cleanest and best source of energy]
Although some hold up China as an example of early adoption (1970) of nuclear energy, it is pointed out that the technology of that time was not sophisticated. Although there are further important nuclear developments, today, China is building an average of two large, coal-fired plants per week, almost all of which use out-of-date, high-emissions equipment rather than more expensive, clean-burning technologies.
Québec politics
At least one observer believes that unless Jean Charest’s poll numbers improve drastically by December, there will be a change in the leadership of the Québec Liberals with Monique Jérôme Forget the most likely successor to Mr. Charest. This presents the unique possibility of women at the head of both the Liberals and the PQ, possibly promising a more civil demeanor in the National Assembly.
A recent CROP Poll showed that the vast majority of Quebeckers – 68 per cent – believe the PQ should abandon its sovereignty option and instead fight for more powers for the province. Accordingly, Ms. Marois’ has decided to put more emphasis on seeking greater provincial autonomy, rather than place Quebec’s political independence at the forefront of her priorities.
Dr Louise Guay Thanks Wed1322 2:16 video
for Wed1322 July 4, 2007 by Jacques Clément
Thursday 05 July 2007 rci OTTAWA: HIGHER INTEREST RATES FORECAST
The Bank of Montreal predicts that the Bank of Canada will raise interest rates twice this summer and that after the second increase on Sept. 5 it will stand at 4.75 per cent. The BMO's report says that although economic growth slowed in April, it will have gained sufficiently in May to arouse the central bank's apprehensions regarding inflation. BMO's economists also predict that the rate increase could jolt the Canadian dollar as high as US96 cents. The Canadian currency rose .16 of a cent on Wednesday, closing at US94.46 cents, its highest level since June 1977.
Thursday 05 July 2007  Quebec Premier Jean Charest said Wednesday he will stay on to fight the next election despite the battering suffered by his Liberals in the March 26 provincial vote and in recent opinion polls.
Thursday 4 July 2007 To day NYT Podcast | Menu
Radio
Like the report of Mark Twain's death, reports of the death of radio –at least FM – are greatly exaggerated.
Real estate
Canadian dollar is expected to decline against its U.S. counterpart.
The economy
See also JACQUES CLEMENT: Pages ON THE ECONOMY
Notes by Herb Bercovitz OWN
Editor: Diana Thébaud Nicholson OWN
Radio, the long-lasting treasure
intro Wed1322 | Wed1322 slide show
Oil
Note
Wednesday-Night creates charts and follows stocks, including timely related financial news items, in which Wednesday Nighters are interested and in order to demonstrate a service that could eventually be developed and marketed. Wednesday Nighters are invited to participate and help to test the service.
see Wednesday-Night.com Flip charts
QUOTES of the EVENING from recent
Wednesday Nights
2007
Past Quotes Best or All
W-N Links for #1322
2007 Notes for #1322
Rex Murphy's
Point of View index
Menu to mitworld.mit.edu/ on-demand videos of significant public events at MIT. in RealPlayer
Ex Thomas L. Friedman. While you were Seeping The World IS Flat Video length is 1:15:04.
for Wed1319 July 4, 2007 by Jacques Clément
Jacques Clément with Music Wed1322 4:09
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U.S.
After reaching the record level of 13,676 on June 4, the Dow Jones lost 380 points by June 12, but has recovered 280 points since, despite strong energy and commodity prices. The trade deficit improved by 6%, personal income rebounded, personal consumption picked up, the Beige Book was more upbeat, leading economic indicators recovered in May, business inventories picked up, May construction spending was strong (almost 1%), the manufacturing sector was at a three year high, boosted by new orders and production, new vehicle sales remained at 16.4 million, annual rate and G.D.P., after rising only by 0.7% in the first quarter, is expected to reach 3% - 3½% in the second quarter, despite the worst housing market in sixteen years.
May housing starts declined for the first time in four months, thirty year mortgage rates reached 6¾%, the supply of unsold houses is at a 4.4 million record, with rising and record foreclosures. Bear Stearns $3.2 billion bailing out one of its two hedge funds collapsing under bad sub-prime loans, housing lenders tightening their credit standards with $800 billion of sub-prime mortgages and a $6 trillion mortgage backed securities. Variable rate mortgage loans totaled $515 billion this year and $680 billion next year (over 30% being credit risks). Sixty mortgage loan companies have closed. Existing home sales have declined 11.5% since March to the lowest level in four years and new home sales were off 1.6% in May. Existing home median prices have dropped for the tenth consecutive month, the largest on record and new home prices (May) since its seventeenth consecutive monthly decline and the steepest decline in sixteen years. With core inflation at 2.2%, core personal consumption inflation at 1.9%, the lowest in three years, the Fed stayed steady at 5¼% Fed funds rate on June 28 and is likely to remain unchanged on August 7.
CANADA
After reaching a thirty year high of 94.80¢ U.S. on June 4, the Canadian dollar has eased a cent, given crude oil declining by $4.65 U.S. and gold, $23.00.
After reaching a new record on June 18 at 14,176, the T.S.X. experienced its tenth important correction of 512 points and rebounding to over 14,000 this week as crude oil rebounded over $5.00 at $71.41, gold traded at $677.00, renewed demand for commodities with copper reaching a six week high and the Canadian dollar, a thirty year high at 95½¢ U.S. despite Canadians buying over $13 billion of foreign securities, the second highest on record and the largest increase since December, 2000.
Mergers and acquisitions remained at a record pace. After 3.7% economic growth in the first quarter, April was flat with weak employment, 8½% decline in building permits, weak shipments, over 3% decline in wholesale sales, but G.D.P. in the last twelve months is up 2.4% with stronger trade surplus, very strong housing starts (+8½ %), rising retail sales in the last two months (+2.2%), record existing home sales and prices, the fastest productivity rise in two years, rising capacity utilization, strong corporate earnings, business and consumer confidence remaining very strong, solid income growth, strong new vehicle sales (+7.6% in May), the strongest since July, 2005, continuing strong leading economic indicators, rising new factory orders, solid hiring prospect for the third quarter and strong optimism about the production outlook.
With unit labour costs surging 4%, the steepest rise in sixteen years, core C.P.I. of 2½%, highest in four years and average weekly earnings over 3%, bank of Canada is likely to tighten monetary policy on July 10 by ¼% to 4½% as the economy is operating slightly above its non-inflationary capacity.
Wed 4 July 2007
Near Term Trading Outlook: Wed1322
- Canadian Dollar:94½¢ U.S. – 95½¢ U.S. +1.00
- Euro: $1.34 U.S. - $1.35 U.S. uc
Crude Oil: $70.00 - $72.00 +5.00
- Dow-Jones: D.J.: 13,500 – 13,700 +200
- The T.S.X : 13,900 – 14,100 +100
- Gold:: $650.00 U.S. - $675.00 U.S. uc
 Stephen S. Poloz VP EDC Economics Weekly Commentary
Demystifying Political Risk - July 4, 2007
Exporters and foreign investors face a wide array of risks when doing business abroad. Political risk may be the least understood, leading some companies to ignore it altogether and take unnecessary risks, while others worry too much about it and pass on key growth opportunities.
What constitutes political risk? Technically, political risk refers to the possibility that an investment in a foreign economy could be expropriated by the host government, or irrevocably damaged by insurgency or war, or that there could be a freeze on foreign exchange transactions that prevent the investor from benefiting from its investment. Of course, perceptions may be easily distorted – a single expropriatory act can erase many years of good business performance, simply because the act is highly publicised while good experiences happen every day but go unnoticed. Past issues | his WN page
Commentary podcast. 
- Wednesday-Night.com on Privacy
- Canadian dollar vs euro | Dow 30 w-n chart | TSX
- Fed Parties Stéphan Dion | Stevie Harper
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