Category Archives: America

Wynne-win for Canada! And, is America ready for another white male President?

I welcomed Kathleen Wynne‘s victory in the leadership race for the ruling Ontario Liberal Party this past Saturday, even though I live in faraway British Columbia.   And I do mean far away — seriously, the International Space Station is ten times closer to the surface of the earth, than Vancouver is to Toronto.  (Though that probably says more about how not-so-far-away the International Space Station is to us.)

Wynne is of course lesbian, and her ascent to the Premiership of Ontario — Canada’s most populous province — is a matter of minor national pride, whatever her policies may be, and however effective historians judge her tenure.  Someone’s always got to be first.  [For our dear American readers, a provincial Premier is analogous to a state Governor.]

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Sniffs from a Schiff…

(Originally written March 7, 2012.  Part of Great Upload of 2013.)

A colleague once showed me a book by Peter Schiff, in which the author and investment-house CEO purported to explain how the US got into the muddle they’re in.

Like so many textbooks I left it unread, but according to Wikipedia, Schiff believes a lot of the US’s problems would go away if people just saved more money.  (Oddly enough, there’s no mention of drastically-higher taxes on high-income earners like himself.  Go figure…!  ;)  )  As is typical for people in the financial sector, he finds a way to blame government.  :)

So it’s hilarious that his brother and coworker Andrew Schiff is saving so little from his $350k salary that he’s worried about the effect a smaller-than-average bonus would have on his lifestyle!  (It’s all over the web, so you may well have been pointed to it already.)

Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country’s top 1 percent by income, doesn’t cover his family’s private-school tuition, a Kent, Conneticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.

“I feel stuck,” Schiff said. “The New York that I wanted to have is still just beyond my reach.”

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The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is CEO. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year-old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years.

“I can’t imagine what I’m going to do,” Schiff said. “I’m crammed into 1,200 square feet. I don’t have a dishwasher. We do all our dishes by hand.”

Welcome to the club, Schiff — may I suggest cucumber-scented Method dish detergent?  It’s “aromatherapeutic”!  ;)

And a note to my fellow 10-percenters

Not that we should snort too loudly of course; if any of us 10-percenters [most folks on I emailed this to, being fellow engineers or other professionals, are probably among the top 10% of individual income earners in Canada] were to complain about the lifestyles we strive for being just out of our reach (thanks to the hedonic treadmill), there’d be people a-plenty across town, let alone across the world, justly ridiculing us for our own fiscal profligacy and distorted lifestyle expectations!  :)

Plug-in electric car sales in Canada, 2012 (via GreenCarReports)

My new adventures as a Canadian correspondent for GreenCarReports.com begin with this post.  Readers are encouraged to show them some love.  :)

My ongoing efforts to track Canadian EV sales figures (and those of a few other countries) remain visible here.

Alberta oil selling at 50% discount to world price…

…which explains why the Canadian government is Hell-and-High-Water-bent on building a pipeline, any pipeline, anywhere.

First, the stats

Over the past few months, new stories have noted that Canada’s oil sector isn’t getting full price for its heavy oil — in large part because American pipelines are well-supplied with newly-flowing tight oil (“shale oil”) from North Dakota.

As a side note, I should clarify that heavy oil — termed Western Canada Select — is a somewhat-upgraded form of bitumen.  Removing the sulfur and upgrading the oil a bit more, would turn it into the “light sweet crude” used for the world’s billion automobiles.) 

Western Canada Select is more refined, and more value-added, than the diluted bitumen that Enbridge has proposed to ship to the coast of British Columbia.  The Kalamazoo River spill in 2010 that added $750+ million in cleanup costs to the local economy, involved diluted bitumen (and Enbridge).

The discount on Alberta heavy oil is measured relative to the North American benchmark price, which is for West Texas Intermediate (WTI) crude.  And said discount has been growing faster than a pimple before prom reaching a jaw-dropping $40 per barrel this week.  [2013-01-31: historically the discount has been about $20 per barrel  – Matthew]  WTI sells for $96 per barrel, and Alberta heavy sells for … $56.

One barrel of oil is about 160 Litres, so this means that Alberta is giving up 25 cents per litre on its oil exports.  By way of comparison, the current WTI price works out to a total price of only 60 cents per litre.  We’re talking some serious discounting, here.

Western Canada Select vs. Brent crude

Of course, the world benchmark price is Brent crude, traded in London.  And for various reasons, West Texas Intermediate Crude trades at a discount to it!  I’ve taken a snapshot of the Bloomberg Energy page below; you can see that the Brent price is $112 per barrel.

Bloomberg Energy Jan 18, 2013

We see that the price of Brent crude ($112/bbl) is exactly twice as high as the price we established for Alberta heavy ($56/bbl).  Alberta heavy crude is selling for half-off — it’s like a BOGO (buy one, get one) sale!

Oh, but it gets worse (for Alberta)

I’ve previously mused about the plausibility of US oil demand falling in the coming decade.  Which means Alberta will need to find other markets.  It will probably benefit from the building of an east-west pipeline across Canada (finally!) but wouldn’t be enough added consumption to justify expanding bitumen projects.  That would mean leaner profits for Calgary head offices, less construction work in the oil patch, and lower royalties for the Alberta government.  (Tales abound of Newfoundlanders leaving Alberta in droves, to ply their trade in their home province’s newly ascendant offshore oil sector.)

It’s a far cry from the Bow River bluster of five to ten years ago, when Alberta seemed assured of sustained, stupendous wealth — and provincial surpluses which would dwarf those of the Federal government.  (Despite the highest average yearly oil price in history, the province ran a deficit in 2012!  In basic terms, the oil sector has effected a regulatory capture of Alberta’s government, which allows them to export raw goods and perform the value-added refining elsewhere.)

The oil patch’s hopes now seem pinned on one of a few pipelines, all of which face strong opposition, and none of which can soak up the new production to which Alberta aspires.

a)  Keystone XL, by which Alberta heavy oil could be upgraded further in the US, and then exported.  Opposed by the worldwide 350.org movement.  (600,000 barrels per day)

b)  Enbridge’s Northern Gateway, by which the oil could reach the Pacific Coast.  Given the dozens of First Nations standing in the way, who have recourse to the courts and have sometimes reported dismissive treatment at the hands of Enbridge representatives, this seems unlikely.   (500,000 barrels per day)

c)  Kinder Morgan’s Trans Mountain Pipeline expansion, by which the oil would be exported via Vancouver — birthplace of Greenpeace and the David Suzuki Foundation.  (Added capacity: 600,000 barrels per day.)

Pipe dreams

CAPP, the Canadian Association of Petroleum Producers, recently projected that Alberta would produce 3.2 million barrels per day of heavy oil, by 2020.  This represents an increase of 1.6 million barrels per day.  To accommodate this increase, all three of the above pipelines would have to be approved, up and running!!  Given the opposition each pipeline will face, a Beatles reunion would seem more likely…

(Yes, Alberta could of course use a *lot* of railcars, as they’re doing in the Dakotas right now.  This is doable, but more expensive — and would again cause Alberta’s oil to sell at a discount, to reflect the added costs of rail transport.)

To sum up, it doesn’t look like Alberta will enjoy another run of euphoric boom years, for some time to come.  Their product is currently selling at a deep discount due to a surge in production of US tight oil.  Meanwhile, US oil consumption is dropping (thanks largely to more-efficient vehicles) and all three pipelines face opposition.  (A Vancouver paper recently noted that opposition to the Northern Gateway pipeline in rural British Columbia ran so high, it could prevent the Prime Minister from winning a majority in the next election.)  Industry shows no signs of wanting to locally refining the product further, meaning the province is locked out of adding further value, winning higher prices.  And perhaps most fearfully of all, the following words from the head of AIMCo, the Alberta Investment Management Company:

“The notion that oil is going to become more expensive because as Asia and India need more energy there’s going to be a demand-supply imbalance, well, it may not be as much of an imbalance as everybody thought it was.”

The bitumen barons’ triumphalism from roughly 2004 to 2008 was predicated on the belief that a rising tide of Asian oil demand would lift Alberta above its provincial peers.  If, maybe, China and India won’t need as much as everyone thought … the ebbing tide could leave them beached.  On the upside, its residents’ expertise with heavy equipment and drilling could help Alberta pivot into a wind turbine / geothermal powerhouse, if it chose to do so.

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[note: while environmental considerations — and generally, the desire not to befoul one’s nest — are also a factor in the future of oil production, I side-stepped the topic altogether, as the above factors are formidable enough on their own.]

The millionaire tax, American- and French style

(originally written Apr 19, 2012.  Part of my Great Upload of 2013.)

The American “millionaire tax” plan

At the moment, Obama is facing stiff resistance from his proposal to tax all income above $1,000,000 per year at a rate of 30%.  This, despite the support of one-time world’s-richest-man Warren Buffett, who wondered in a NY Times editorial last year why he, a billionaire, paid a lower tax rate than his secretary.

(Answer: most of Buffett’s income comes in the form of capital gains taxed at 15%, which is lower than income tax rates paid by all but the lowest-paid labourers.  A similar situation exists in Canada — capital gains are taxed at half the rate of actual work.)

The French “millionaire tax” plan

As has become the regrettable pattern, Obama’s proposal sounds nice on the surface, but pales in comparison to others being bandied about.  A French economist suggested his country raise the top rate from 40% to 60%; and, not to be outdone, Francois Hollande, the leader of France’s Socialist Party, proposed 75%.  :)  And get this — with the election imminent, Hollande is topping the polls!!

Of such things, the new leader of Canada’s NDP, Thomas Mulcair, can only dream.  ;)

France being France, it wouldn’t be unprecedented for Hollande to win the election and runoff.  In 1988, the year after Reagan gave his famous “tear down this wall” speech in Berlin, and with Glasnost and Perestroika in full effect in the Soviet Union, France re-elected a Socialist as President.  Yessir, the French rabble takes marching orders from nobody.  :)

In May 1968, student protests there went viral and culminated in a general strike by two-thirds of the working population, causing President de Gaulle to flee the country, fearing revolution.  (Not an unreasonable fear; in the prior two centuries, the country had gone through four revolutions and two empires, and was on its fifth republic.  They even found the time to restore the monarchy once!)

In the snap election a few weeks later, in a display of that characteristic French je ne sais quoi, voters gave de Gaulle a landslide majority, having decided that he was actually better than the alternative, after all.  (When they say a week is a long time in politics, kids, this is exactly what they mean!)

Millionaire surtaxes in general…

In broad terms, surtaxes on the very highest incomes tend to be difficult to implement, because the 0.001% who live in “Richistan” tend to move between countries in a game of tax whack-a-mole.  Aiming at the top 0.1% or even 1% is probably more productive, as they’d be more likely to look for tax loopholes, than move to the Cayman Islands.  And that at least creates jobs for accountants and lawyers.  Plus, there’s more of them.  ;)

This makes me wonder if, for all the global advantages English brings us internationally, it becomes a disadvantage, here: Canadians can move to most parts of the US without suffering much culture shock.  Britain and Australia would be bigger cultural leap, but most of us would still have “home-language advantage”.

For the uberrich Swede, Norwegian, German or French person to emigrate to a lower-tax zone though, they’d have to leave their social circles, adapt to a new culture, and manage day-to-day in a different language.  And if they wanted to stay close to home, their selection would mostly be limited to countries they’ve historically invaded, or countries which have invaded them.  (It’s awesome, the kinds of elaborate theories you can come up with, when you don’t bother to back them up with data!  But in this case the Wall Street Journal provides some cover for the idea that even if the well-off say they’ll leave, they usually don’t.  Reminds me of a certain someone at work, actually…  ;)  )

On this side of the pond, no one really raises a fuss about our cousins’ invasions (1775, 1812) or the fact that we burnt their White House in revenge (1814).  So for well-off Canadians, border-hopping mainly means cheaper home, gas, dairy, phone, TV and internet costs.  ;)  That, and having to put up with heathens who don’t know that some words aren’t meant to be pronounced “abowt”.  ;)

Dinner with the Overclass (“Great Upload of 2013”)

(originally written Nov 17, 2010.  Part of the Great Upload of 2013.)

We had the pleasure of dining with the overclass on Monday, at an event put on by the wealth-services branch of a mutual fund company.  I’d charmed our way into that club earlier in the year, despite falling well short of the minimum asset requirements, using those charismatic powers that my wife seems curiously oblivious to. ;)  What clinched the deal for me, was the lure of a free dinner every time those guys swung through town — finally, someone giving us something for letting them gamble with our money! ;)

While there were a few of us pre-retirees there, the crowd leaned well-dressed and geriatric. No doubt some were keen wanting to move from merely ostentatious to fully obscene wealth — the kind of folks who might have forgotten (or never known?) the more immediate financial concerns of the bottom 98% of their fellow citizens, even in a well-to-do country like Canada. I believe I was the only person wearing sneakers. :)

A lot of people looked like they could’ve been from (exclusive Vancouver private boys’ school) St. George’s class of 1960. Or maybe 1950. But ex-Ballard colleagues were there — which was pretty cool. If anyone wants to get in touch with them, let me know.

The Eur-“uh-oh”-zone

The evening consisted of free (I wish I was a drinker!) cocktails followed by a dinner lecture during which each money manager discussed their economic outlook — which generally fell somewhere in the ominous-to-apocalyptic spectrum. (“The market giveth, and the market taketh away…”) Mainly for the reasons described in this deservedly-viral YouTube video.

With catastrophic irony, though the US Federal Reserve is trying to weaken the dollar with “quantitative easing” (to improve their economy through exports) it seems more probable (60/40?) that the US dollar will rise from here. (It’s notable that the Japanese government has been trying on and off to weaken the yen for, oh, half my life, but their currency recently hit all-time highs against the US dollar.) As bad as things are in the US, they’re even worse in Western Europe. It’s as if the US has halted its horse on the racetrack… but the EU’s horse is moving backwards.

Ireland is going to need a bailout; they’ll probably get one, because Germany leads the Euro bloc, and German banks are acutely exposed to Irish debt. Portugal’s also looking “sinking ship”-shape, and Spain — whose economy is roughly the size of Canada’s — is listing badly. Back in the day the US used “domino theory” to justify propping up governments in south-east Asia to prevent communism from spreading (“if Vietnam falls, Cambodia will fall, then Laos, and then … eventually, India”).

Right now, Eurozone governments are using similar logic, trying vainly to contain the financial contagion. Political problems are inevitably going to emerge from German bankers imposing austerity on Ireland, French citizens subsidizing Greek ones, and so forth. At least in the US, while “red states” might be irritated at having to bail out California, they share a national identity and mythos.

Siiiiiiilver

The speakers spent a bunch of time talking about silver, which has gotten a bit of attention with its sharp ascent (and descent) lately. While falling industrial consumption can negatively impact prices during tougher times, it would seem that in upcoming years it should continue to do well. This is mainly because, over the years, the “geniuses” at certain investment banks placed highly-leveraged bets on the commodity’s price… never imagined that anyone would actually be paranoid enough to take delivery of the actual metal, instead of booking paper profits. So they’re actually on the hook for a lot more silver than is readily available for purchase on the market.

Smelling blood, their deep-pocketed rivals have been hoovering up all available silver, in a successful-thus-far attempt to create scarcity and gouge the investment banks. As an example, the Sprott folks recently started up an exchange-traded fund whose business plan is… to store silver bars in a vault. They had to cut their IPO back from $750 million, though, because they could ‘only’ find about $600 million worth of silver on the open market. One of those ‘rich people problems’…

Mind you, I largely ignore the silver market. Because it’s so small, it’s insanely volatile — relatively small flows of money (by global standards) can completely distort the market, upwards or downwards. Most developing countries which successfully navigated their way to reasonable prosperity restricted capital flows for this same reason: too much money suddenly coming into a small economy can quickly create a bubble, and too much money suddenly leaving can exacerbate misery, neither of which are particularly beneficial.

517 – 1 !!  Awwwright!

One bright side for the global south did come out of the Overclass Night, though — it was the firm’s assessment that after centuries of colonization, mercantilism and marginalization, developing countries are generally in much better financial shape than their First World counterparts. Stagnation in the West for the next several years, should contrast with relative health in the majority world. Score one for the underdogs! :)

By my scorecard that makes it — let’s see, Columbus was 1492, right? — oh, about 517-1. ;)

EV stats for British Columbia (2012)

The kind people at CEV for BC sent over some statistics on Clean Energy Vehicle rebates issued by the provincial government.

While the CEV rebates were available for electric, natural gas, and fuel cell vehicles, my understanding is that the rebates break down as follows:

– 308x EV’s

– 0 NGV’s

– 0 FCV’s

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Given the limited infrastructure and product offerings (apart from a natural gas Honda Civic, I’m unaware of other methane-based production vehicles) it’s unsurprising that natural gas vehicles didn’t capture any rebates.  Much the same can be said for fuel cell cars.  In contrast, almost everyone in Canada is connected to a grid, and all the major auto companies are making plug-ins, if in modest quantities.

It’s also worth noting that natural gas is becoming more common in the trucking industry (where centralized fueling depots provide sufficient infrastructure) but that the above rebates only apply to “light-duty” passenger vehicles.

More after the jump!

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Cumulative Canadian (PH)EV sales (through Nov 2012)

It doesn’t look as if this data has been centralized on the web yet, so I’ll start.

Cumulative Canadian (PH)EV sales through Nov 2012 can be found at this link, here:

https://docs.google.com/spreadsheet/ccc?key=0Ah8gcGMaITi4dHdoZzJYdHFvZldnZkRCRWxGbjhicEE

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The list is incomplete (for example, no Tesla data yet) but I’ll be trying to add that in, with each monthly update.  I’ll also try to get a province-by-province breakdown of the numbers, if and where possible.  Nothing like a little internecine rivalry to accelerate EV adoption eh?

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Various notes include:

  • Canadian (PH)EV sales are currently running at about 4% the US rate.  Given the 9:1 population ratio, one would expect sales to run at roughly 11% the US rate.  Part of the reason for the lower run-rate is that most models seem to’ve launched first in the US, and arrived in Canada only later.
  • the Chevy Volt holds an “iPod”-like dominance in the Canadian EV market, comprising roughly 75% of sales.  (The Volt looks to have about a 40% market share in the US.)  Who a few years ago would have thought that the company that brought out the Hummer, would have a sales lead in an eco-category, any eco-category?

The US once was, but will never again be, the Saudi Arabia of oil

[Update: slight revisions to the “…join us next time” paragraphs at the very end.  :)  ]

The idea that the US might one day produce more oil than Saudi Arabia, popularized by an International Energy Agency (IEA) report, has gone viral in recent weeks.  It’s like the “Call Me Maybe” phenomenon, but for Very Serious People!  :)

Alas, the idea that the US will out-produce Saudi Arabia is a vaporous mirage.  Well, unless Saudi Arabian production falls off a cliff, that is.  The projections are built on the kind of verbal trickery that transformed “47% of Americans don’t actually earn enough money to pay federal income taxes” into the “47% of Americans are lazy takers” meme that sank Mitt Romney’s campaign.  Did those World War II veterans think they could just beat Hitler and rely on handouts in retirement?  ;)

It’s said that where there’s smoke, there’s mirrors, so let’s find that disco ball, shall we?

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Green byelection blues

Alas, the Green Party didn’t pick any seats up in the Nov 26 Canadian federal by-elections.  While their strong showings probably count as a real moral victory, I imagine at this stage they’d prefer amoral, real victories.  ;)  As it turns out, Parliament’s composition is unchanged, “while my green heart gently weeps”.  Despite donating to the Official Opposition (whomever it’s been) since 2008, I have a soft spot for the plucky upstarts.

Chris Turner got 25% of the vote in the Calgary Centre riding; which, according to a Globe & Mail commentary from Canadian polling blog threehundredeight, could mean that he pulled a lot of the “Red Tory” voters.  Since probably only 1-2% of Canadians are dues-paying members of political parties (see p16 of this report), some of this blog’s other readers might not be up to speed, so I’ll attempt to summarize for their sake.  :)

After years in the political wilderness first as an Opposition member and then as a lobbyist, current PM Stephen Harper succeeded in uniting far-right-wing (by Canadian standards) Alliance party with right-wing (by Canadian standards) Progressive Conservative party.  And promptly positioned the new Conservative Party considerably to the right of the old Progressive Conservatives.

In the recent provincial elections in Alberta, the federal Conservatives openly supported the far-right (by Canadian standards) Wildrose Party, infuriating many Albertans who vote Conservative federally, but vote Progressive Conservative, provincially.  These folks are called “Red Tories” because they’re on the progressive side of the conservative spectrum, and globally, red tends to be the colour of progressive parties, and blue is the colour of conservative parties.

The main exception is the US, where the red party — the Republicans — are the conservatives.  (And wow, are they ever!)  This is because they actually used to be the progressives, and the Democrats used to be the conservatives, with a hammerlock on the white vote in the southern US.  This all changed in the 1960’s when the Democratic Party embraced the Civil Rights movement.  The Republicans went after the white southerner vote, which is why the US has a progressive (by American standards) “Blue” Party and a conservative (by any standard) “Red” Party.

But back to Alberta, these so-called “Red Tories” appear to have defected en masse to the Green Party in this byelection, in displeasure at the Conservatives’ “as-right-wing-as-the-Wildrose-Party” candidate.

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