Fuel Inflation
The price of oil jumped 3% on Friday to $81.17. Like most commodities, from gold to nickel, it is quoted in US dollars. The price of a litre of regular gasoline in Toronto is C$1.45; premium is C$1.75.
Across Lake Ontario in Rochester, New York the price of regular is the equivalent of C$1.07 (US$3.21 a US gallon) and premium C$1.23 a litre (US$3.59 a US gallon). There is a website that does the complex conversion.
President Biden is gung-ho on carbon emissions, the stuff that comes from the back of cars that run on oil. But he also wants OPEC to produce more oil to lower prices. Gasoline prices hit poorer people — bigger percentage of their take home. Richer people don’t really care. Politicians know there are more poorer voters than rich ones.
Oil stocks have been through the roof. Many well-meaning people dumped oil stocks because of an aversion to fossil fuels. Selling the stock has no effect on what the oil company is doing but it does send a virtuous message.
The price of Canadian Natural Resources CNQ, the largest producer in Alberta’s oil sands, closed up 3% on Friday at C$54.21. It has tripled in two years. Many public pension funds dumped the stock. Mangers feel good; pensioners have less cash.
Food Inflation
Wheat prices are at $10.17 a bushel, almost double what they were a year ago. Even if you skipped Economics 101, it means bread prices are going higher.
The chart below— pinched from the Wall Street Journal— shows the price story. The reason is a poor crop, brought about by drought conditions across North America and Europe.
Rising wheat prices hit not only bread but pizza, pasta, noodles, couscous, tortillas, pies…and the list goes on. Again, the less money you have the more this hits you.
Milk, cheese and yogurt inflation in Canada
The milk marketing board (the Canadian Dairy Commission) is giving farmers a big raise. That will mean all those dairy products will jump in price, by 10% at least. The decision is made by a government agency that is not controlled by Parliament. Marketing boards are a tax on poor people. Richer people don’t notice how much milk costs, they just buy it. They might grumble about cheese.
Canadian Dairy Commission press release
The price of a litre of milk in Canada is C$2.45. The price in the United States is the equivalent of C$1.06 Stand in line at a rural supermarket in Canada and notice colas instead of milk in some shopping carts.
Farting dairy cows produce a lot of methane Prime Minister Justin Trudeau promised to reduce methane in Glasgow. Maybe the people he appoints to the Canadian Dairy Commission are giving him a helping hand.
Whale of a diet
The Blue Whale is the largest animal ever to live on Earth. It dwarfs an elephant and is bigger that the largest dinosaur. Its tongue weighs as a much as an elephant and its heart is the size of a Volkswagen Beetle.
A Blue Whale eats the equivalent of 70 to 80-thousand Big Macs a day, according to a new study.”That amount of food is somewhere in the range of 20 to 50 million calories,” Matthew Savoca, a researcher at Stanford University told NPR.
Blew whales eat Krill, small shrimp-like creatures. The whale’s fecal matter, and there is a lot of it, is full of iron and feeds phytoplankton that in turn feeds the Krill.
Two countries still hunt and kill whales: Japan and saintly Iceland. Not cool..
The way we flew
Thrity-five years ago you could still smoke on planes. There were non-smoking seats but the whole cabinet was filled with smoke. The parents of a friend of mine used to fly only Air France because it was one of the last airlines to ban smoking.
Conde Nast Traveller has a piece on this: “On some long-haul flights, the smoke often became so dense it was almost impossible to carry out in-flight service. “We would have to call the captain and ask him, ‘Can you turn on the 'No Smoking' sign for 20 minutes to clear the air?’” says Rene Foss, a flight attendant who turned her experiences into a book and cabaret show, [Around the World in a Bad Mood!]”
Middle seats were more available. And one of the most popular aircraft was a handsome three-engine gas guzzler, the Boeing 727.
Above is a night scene at Logan Airport in Boston in 1999. There are three Boeing 727s at the gates with one taxiing on the runway. The fourth plane looks like a DC-9.
The 727 was a popular plane but three engines drank a jet fuel. No airline flies them anymore. There are said to be 60 727s still flying — four percent of those built— mostly as cargo or converted private planes.
Spring forward, Fall back
Essay of the Week
Three years ago I wrote a book on the 25th anniversary of a Toronto law firm, Wildeboer Dellelce. To simplify things I wrote a chapter for every year. The big deal for the firm that year was landing the job to take Research in Motion public. Here is that story.
1996
RIM Goes Public
Jim Balsillie wanted Wildeboer Dellelce, and the three-year-old law firm wanted RIM. In many ways the two were looking in the mirror: RIM was cool, hip, and filled with young talent. Ditto for Wildeboer Dellelce.
In 1996 Research in Motion introduced its most revolutionary product to date: the RIM-900. It was also called the Inter@ctive Pager, which allowed users to send messages over the Internet on a secure wireless data network called Mobitex.
The RIM 900: a techno-marvel in its day.
Remember, this was an era when few people understood the Internet. At the start of 1996, there were just 16-million people who used the Internet in the world. That number would more than double in the next twelve months. Today there are 4-billion, from the richest countries to the poorest.
In 1996 RIM's pager was the ultimate in cool. One of its distinguishing features was the QWERTY keyboard, which allowed users to type in messages quickly. They soon got used to using their thumb. Sending a text message using the keypad on a mobile telephone – available since 1992 -- was awkward and time-consuming.
Wildeboer Dellelce had already done several bought deals acting for Investment dealers. The young firm was about to step up the pace.
"I got a call after doing the bought deal letter for GMP from Rob Fraser. He said, `I've been talking with the guys at RIM, and they don't want you to work on this deal for us, they want to meet you, and you should go up there and meet them'. I said okay. This was on a Tuesday," remembers Rob Wildeboer.
Rob and Eric Apps were the team that first worked on the RIM account.
After a call to Dennis Kavelman, the young Chief Financial Officer of RIM, Wildeboer and Apps drove up to Waterloo to be at a meeting early on Wednesday morning. In the room with them was the Troika mastermind RIM's ascent to glory.
Mike Lazaridis was the brains behind RIM's technological wonders and a man who kept a scientific scale in his office to weigh the innards of his inventions against the competition, such as the Palm Pilot.
Jim Balsillie, the talented dealmaker who was stepping up RIM's game in capital markets; and Dennis Kavelman, the bright young CFO. Both Eric and Rob came away from the meeting even more impressed with the team at RIM
"As we were driving back, I remember saying to Eric, `This, in my mind is a game-changer'. We just sat down in the same room with the smartest people that I've ever seen. Lazaridis was a technical guy, but Dennis and Balsillie were just as bright. Lazaridis could make the stuff technically but Jim was the strategic thinker and Dennis, in my view, was the glue that kept them together as they were thinking of things," says Rob.
Eric Apps remembers that around this time two upstarts, Yorkton Securities and Griffiths McBurney, were competing with a more old-line brokerage house, Midland Walwyn, to be the lead on any RIM financing. Everyone could see this was a company that was going places.
"We were helping Yorkton, Griffiths, Midland and a few others that were all competing for the mandate. These were all guys like Brian Campbell at Midland and Scott Paterson at Yorkton and Rob Fraser at Griffiths. We were helping them all just in terms of putting their structures together," says Eric Apps.
"They were all pitching to the RIM guys who finally decided to go with Griffiths. Then the RIM team asked Griffiths they were going to use as their lawyers and Rob Fraser said they were going to use Wildeboer Apps and Jim Balsillie said `No, we're going to use those guys, you're going to have to find someone else'."
***
Eventually Wildeboer Dellelce was officially hired as RIM's law firm. Rob Wildeboer recalls the meeting, that ended with a financial windfall for every lawyer at the firm.
"I went up to Waterloo, and I was in a meeting room with Jim Balsillie to my left, Rob Fraser (of Griffiths McBurney) to my right, Dennis Kavelman on the other side and Jim said to me, "Can I sign this letter?" I stated that I had written it for Rob, but it's standard so, yeah, sure. He signed it, and he then said, "Okay, you're my lawyer now so is there anything we can do for you"? I replied yes, the firm wanted to buy a unit of stock which was $151,000, and he said: "done"."
The underwriter, Rob Fraser, said Balsillie couldn't do that because the deal was oversubscribed and it's got to go to the clients he promised it to. Fraser said he couldn't even buy it any for his own account.
Jim Balsillie looked at him and said, "He's my lawyer, and it's my call".
It was a gamble. In 2018 dollars $151,000 is the equivalent of about $225,000 according to the Bank of Canada's Inflation Calculator.
"I drove back to the office, and this was the entrepreneurial nature of our firm: I said okay, we have to talk because I've just committed to buying a unit of this stock, of this company that we've been talking about," says Rob Wildeboer.
"The first question from my partners was, `You did what?'. Then ‘do you think it's a good buy?' I replied that if they didn't take it, I'd put a mortgage on my house and take it all." That burst of bravado convinced them. They were in. The seven lawyers at the firm each got one-seventh of that $151,000.
When RIM went public, the shares were worth $3.40, and since that time they have split two for one and three for one, so the equivalent was about fifty-six cents. "Even today it's up twenty-five times," said Rob in 2017. "But if we had held the stock forever it would be up two hundred times.
Many of the partners sold their shares when the doubled. Eric Apps hung on longer than most. "I think I sold at around $20 thinking I was a very clever guy," says Eric with a self-deprecating laugh.
Carol Doty made the biggest percentage gain. The long-time personal assistant and employee number one hung on to almost every share she ever acquired during her 20 odd years at Wildeboer Dellelce, maybe out of a sense of loyalty. She didn't want to seem rude by selling. It paid off.
"I had a hundred shares of RIM, and I sold them for $168 a share, and they didn't cost me anything, Rob (Wildeboer) gave them to me as a gift," says Carol. There were other shares she acquired while working at Wildeboer Dellelce that she held on to as well. "I just sold Aecon and Martinrea recently," she said in the summer of 2017.
Wildeboer Dellelce's involvement with RIM added more credibility to a corporate boutique who at this stage was just three years old.