Category Archives: Economics

Kootenays Takes Economic Hit

Look out Fernie / Sparwood / Blairmore…you’re next. Kootenays take economic hit. Teck laying off 500….and it’s yet to be reported exactly where the blue chip miner is going to apply its cuts. Their steel producing coal isn’t quite as appealing to the markets. Could it be time to start promoting golf courses and casinos with the forestry industry also in the doldrums? The sleepy towns of Cranbrook and Kimberley get by (barely) with the closing of Cominco years ago. This corner of B.C. is still holding on to some semblance of conservative values in the face of a rising industrial backlash but it could all be about tourism once the next movie star catches a glimpse of the Teck open pits fuelling rhetoric for light weight politicians.

Is Canada Corrupt?

Is Canada corrupt? You go to work every day and pay your taxes. Your taxes are intended to provide services which benefit the public good. Naturally, human resources are required to administer such services. Your government also assesses your country’s standing in the world and maintains relationship with other nations in the context of preserving freedom and quality of life for citizens. 

Then we have a system of commerce which operates under the guise of “capitalism”. In a capitalist system, small businesses and large businesses operate with particular reasonable regulations relevant to their industries and such regulations are imposed also in the context of the “public good”. An inherent trait associated with “free enterprise” is the right of business to “fail” due to whatever underlying factors are confronted. It is not the business of governments to pick and choose winners and losers through political bias, personal relationships, or preferential treatment due to the geographic jurisdiction of stakeholders. If such a landscape was permitted to exist, free enterprise would lose its appeal as a viable commercial system to engage with freewill unencumbered by systemic bias. 

Today, as learned through an ethics report – your country has failed you because in spite of you playing by the rules, you’ve come to learned that your federal government has a interfered in the legal process of a defendant charged with improprieties in the name of “picking winning and losers” in the capitalist system.  One must ask, as a nation, are we any different from third world countries which make ever day habits of conducting affairs on such terms?    

Cursory Review Calgary Arena Deal

I’ve seen some initial reaction to this deal and thought…why not take a closer look at what is available for information. Did you know that there is a “land option” within this deal whereby the Flames have the “option” to acquire and develop nearby lands which have not been wholly disclosed in total? What’s the option price and the current market value of such lands? The “majority” of event revenue will go to the flames and it appears by induction we are lead to believe that this “majority” amount will be 98 per cent with 2 per cent ascribed back to the city as a “facility fee” capped at $3M for the first five years. CTV news has me believing this is all the city is going to get with respect to revenues. Just so this is clear….Calgary will pay half building costs and receive back 2 per cent of revenues. No parking. It’s Just 2 per cent of aggregate revenues. You best hope that people still like hockey in 20 years. 

Break even cash flow is what’s going to prevent a tax increase.  I’m suspect….yet the city apparently is promising no tax increase in lieu of the deal. The facility fee would be the biggest single revenue source with respect to the city’s interest and this is a huge variable dependent upon the Flames ability to book events in addition to its hockey games. The naming rights are chump change. Would there be finance charges associated with the City’s construction and demolition component? How is the non-sporting taxpaying Calgarian supposed to benefit from a non-descript “community engagement program” or “community sports funding”? Are these payments back to the city indexed for inflation? What if the Flames organization runs into financial trouble and becomes ill equipped to pay these amounts which are the second most material source of city benefit? Yes, benefit and not cash given the funds would be allocated to special interest group(s) and not available to appease shortfalls.  As for accessory tax revenue from adjacent businesses – well in theory alternative developments would also generate such revenues.

What Is A Market Maker?

What is a market maker? A market maker was an investment industry professional who had a responsibility to create a market in an environment of low liquidity. This was manual job when automated trading was not fully deployed. The market maker represented a firm with a seat on the exchange and would put up a bid or sell order in order to create the market among stock issues of low or nil volume. With fewer retail investors looking to trade, the market maker has taken up business elsewhere. Why is this topic relevant you ask? Well, Jim Rickards – author of Currency Wars claims that when the next stock market crash arrives, it could be a quick turn south without market makers stepping in to purchase during a panic. Sure, there are triggers to seize trading amidst a panic but what about when the light turns green once again.

In a market which quickly turns negative, mutual funds would be relying on fund managers to be decisive and quick at the switch – but with mutual fund’s exposure to such large relative weighting in one stock compared to a retail investor, how orderly could an exit be? The mechanics of trading in a stock market are worthy of anyone’s attention. Are there hedge’s available to you, the retail investor, which are not being disclosed to you because of a misconceived “fiduciary duty” which a broker thinks he possesses. That is, a notion that you lack sophistication to understand a hedge. Education in finance is important to all. Bankers should not be suggesting you lack capacity and of course you’re familiar with your responsibility to manage your finances.     

Mid Tier Gold Companies Since June 11th 2019

Yamana Gold, $ 1.92 USD to $2.55 USD for a 32 per cent move

Eldorado Gold (EGO), $ 4.11 USD to  $6.22 USD for a 51 per cent move

New Gold (NGD) went from $0.72 CAD to $0.94 CAD for a 30 per cent move

Detour Gold (DGG) went from $13.25 CAD to $16.58 CAD – 25 per cent

McEwen Mining (MUX) went from 1.39 CAD to $1.82 CAD for a 30 per cent change

Argonaut Gold (AR) went from 1.71 CAD to 1.84 CAD  for 7 per cent

Royal Nickel (RNX) – yes a gold company  went from $0.50 CAD to $0.64 moving 28 per cent

….and how much did the price of gold change from Jun 11, 2019 to July 3, 2019? Well, 9.6 per cent.

As you can see, a premium has been offered to companies with moderate market caps compared to the majors. Risk capital would have been well served with positions here.