Roy Ho’s Blog

Although McCain may not be as much of a moderate as you think he is, McCain is out of line from his Republican party than Obama can be from his Democrat party.  Although McCain’s platform may not be as environmentally friendly as Obama’s platform, McCain is trying harder to sell his environmental policies than Obama, see CNN.  It all means McCain is trying to define the stage the environment better: to choose his battle field to his advantage.  

Environmental crisis is more than oil.  Climate change is also driving the food cost.  The ethanol market is now driving food prices world wide.  It is also driving the agricultural land prices up as well.  Consequently, we are now having a farm bill that is trying to cut down on the farm subsidy.

This is the first time that a Republican President is saying the cut in farm subsidy is not enough.  And this insufficient in farm subsidy cut is the cited reason for veto.  

On the contrary, a Democrat constituency group would want to support a farm bill and may even want to decrease the cuts in order to lower food prices. 

McCain may not have been explicit about his position in farm subsidy.  However, a thorough environmental policy will eventually lead to that point: cut farm subsidy.  

Environmental crisis is eventually down to this point: efficiency on resources, i.e. economics.  Traditional tree huggers, the ones from 60’s, cannot tolerate the word “economics”.  However, this is what it will go down to.  And McCain will feel very comfortable if he will be able to define this issue.  

If McCain is able to define environmental crisis well, McCain will be able not only to fight Obama better than any Republican can, but also expand Republican base to a new territory and grab the traditionally Democrat constituency group over: intellectuals, and some religious left (both Christians and otherwise).  More importantly, McCain can do something other countries have not been successful: take the green voters to the right wing rather than letting left wing to hog them.  Better yet, eliminate the possibility of growth for the Green Party.  

Green parties are getting strong footholds everywhere around the world.  Germany had Green Party to be part of the ruling coalition.  Green parties in Canada are getting 10% of the world both federally and provincially.  The way to starve off your competitor is to offer products the buyers have been looking for.   

1)       the other two parties seldom address;

2)       draws an equal amount of voters from both sides.

Environmental crisis is such an issue.  The biggest loser from McCain’s aggressive environmentalism is to starve off the Greens and continue a 2 party system.  If McCain is successful, then he can make the game even by 2012.

The most difficult asset, in politics, to obtain is not policies or platforms.  In politics, policies and platforms are commodities.  Message is produced.  Brand is a product of time and money.  This difficult-to-obtain asset is the salesmen: politicians.  Obama is a great weapon for Democrats’ long term growth.  Can Obama contribute to this environmental debate? 

http://news.yahoo.com/s/ap/20080303/ap_on_el_pr/democrats_nafta

Obama denied he back tracked the NAFTA through his economic adviser to Canadian diplomats.  Canadian Prime Minister Harper promised to investigate how this information got leaked – not denying that it happened.  The second part is the key.  So, Harper got what he needed: he discouraged the most anti-NAFTA candidate of the 2 Democrat candidates to have a conversation.  In fact, Harper got what he expected: Obama said he did not mean it.  

Now, why the leak?

Harper wanted to establish the fact that “Obama does not mean to re-negotiate NAFTA”.  Harper thought it was very likely that Obama would win Whitehouse.  Harper then decided to push Obama to promise that he would not because Obama has no chips to bargain back at this moment (one can only bargain when at strength).  That is why Harper said no, you do not want that.  On top of that, Harper wanted to make sure no one is getting away with it.  So, he decided to leak it.  Of course Harper expected Obama to deny it.  And so, an investigation ensured, which will drag on.  And this investigation will produce the result to the effect that “yes, it actually happened” with whatever memo, audio or video files necessary to put in front of Obama, if he ever one day decides to negotiate NAFTA.  That’s right.  This investigation will not end until Obama says “let’s re-negotiate.”  Harper just did not trust a much stronger neighbour, especially someone he did not even meet.  And Harper will not have much chips by then.   Harper got his Obama promise.  And he will have something to show for it before the Americans’ TV, just in case.  

This later package is what makes Harper feel comfortable about the promise.   Harper’s mission is accomplished.

Ignore the Arbor story.  Ignore the NAFTA leak probe story.  They may provide some content for talk shows, but they matter not to anyone’s pocket money.  

On 2008.03.05, Toronto Real Estate Board published the sales record for 2008.02.  The result is “respectable”.  Today, StatsCan published the employment/unemployment figures, +43k jobs, higher than the +3k jobs from Bloomberg’s pooled 21 economists.  Immigration policy continues to favour home building industry.  Reading these 2 news would lead anyone to think that Canadian housing market should continue to do well.  Therefore, buy more builders’ stocks. 

You may want to read the news more carefully before you hit the confirm button.  Ontario is the leader of the pack.  Some losses are in manufacturing, but still a positive for Ontario.  A lot of white collar jobs to offset the manufacturing jobs.  And the majority of the growth comes from home building jobs.  And this is where my caution is. 

Does Canada truly have the domestic demand for the housing sales?  Canada is having a decade long housing boom, especially Toronto.  Canadian economy is heavily dependent on US.  The Canadian balance sheet is risk averse to US that everything, including Canadian elections depends on US trade.  

The job growth in building industry is a time lagged data.  A lot is purchased.  Then a building permit, blue print, etc.  This is a long time.  While the sales is slowed, the building process has to continue.  It may slow down, but it has to continue because the cost of stop is worse (the builder still has to pay for interests).  However, sales may be low or even at a loss, at least the builder can minimize the loss when compared to costs of inaction.  Furthermore, a builder can control supply: they can simply sell 2 units at a time.  Note that this is a luxury that only the supply side can afford and is denied to the demand side.

In the short term, meaning within a half a day trading period, or 1 day trading period.  Stocks will of course do well in TSE.  However, institutions will go over the figures.  A retail investor like you may not be able to afford that kind of work.  So, be very careful.  Do not jump on this opportunity to buy.  If you wish to sell, well, you can get a few extra % of gain based on today’s rally sentiment.