Line-ups are a part of every day life. Banks, grocery stores, licensing bureaus, and box offices all conspire to complicate daily chores. By now almost all queues go from a single line directly to a multiple choice of servers. A relatively new concept, banks traditionally followed the multiple line formats whereby each teller served a dedicated line.  

Enter queuing theory. Mathematicians constructed models which demonstrated that a single line up, fanning out to various tellers was more efficient.  A side benefit was eliminating the frustration of customers of  choosing the slowest moving line up. Queue jumping is now a lost art. The puzzle remains as to why most grocery stores stay with the older process.

Elevator efficiency.  Under trial is a system which asks the passengers for a destination, say a law office, assigns  a specific elevator and transports the user more or less directly,  to the floor selected. The math says that travel time and energy use go down.  A more pleasant journey ensues by reducing the stops along the way.

Who would have thought that transport cost and time would be reduced by gathering parcels addressed to a common destination, offloading them then reloading them and sending them on their way to their ultimate destination?  Once again math sent Fedex on the road to success.

Just in time inventory management is a product of a quantifying model. The object is to have the required item arrive precisely as needed.  Presto, inventories, space requirements, working capital, interest, and losses from obsolete inventory are substantially reduced. Not only are cost reduced, management is relieved of the agonies of storage and retrieval.

Eliminating disruptive comments   like “Hey Mac get to the back of the line” are justification enough for operations research let alone the resulting efficiency improvements.

The post What Do You Mean, Get In Line? appeared first on Selkirk Portfolio Management.

 A CARBON TAX, PROS AND CONS

Exploring the complicated world of a carbon tax leads to issues on a larger stage.  For example, the purchase price of  a product does not include the disposal cost of any associated packaging material. This task is left to municipal garbage systems,  paid for by the tax payer who  has little, if any direct  association with the transaction.  Second hand smoke is another example in which involuntary exposure is harmful but at no cost to the smoker.

Alternately this same principal can have  a positive effect benefiting  unassociated parties. A honey producer’s bees provide an essential service by pollinating adjoining fields. The crop  grower  benefits at no cost.

Carbon dioxide is one product of combustion along with water vapor and other compounds.  Global warming is attributed, at least in part,  to carbon dioxide emissions. The general population has no direct involvement in the gaseous emission, however they are influenced by the carbon dioxide effect, whatever that may be.  The full cost to society is not reflected  in gasoline prices,  household heating and cooling, trucking costs and all manner of processes.

Here in lies the conundrum.  The cost of producing one BTU does not include subsequent treatment of the carbon dioxide by-product.  Hence the carbon tax concept.  Apart from the debate over the legitimacy of such a tariff, how can the amount be determined and will the added cost to the consumer cause a consumption decrease?

If the principle of any tax similar to that on carbon dioxide emissions is established, should the concept be applied on a much wider scale? In any event establishing the amount of the tax is arbitrary and likely political.

Editor’s Note

The Observers Editor, Rebecca Waldowski contacted Geraldine’s Professor for her assessment of the essay. Dr. Anita Scalbania  gave the paper a B+. Among her comments were “Your paper is provocative, introducing the economic concept of Externality, defined as a cost or benefit which results from an activity or transaction and which effects an otherwise noninvolved party who did not choose to incur the cost or the benefit.

The post Geraldine of Mount Pleasant Goes Back to School appeared first on Selkirk Portfolio Management.

 Reflective of population forecasts, a major business transaction occurred in 2012 when Nestles paid Pfizer 11.9 billion US dollars for their baby formula business. In part this acquisition was undoubtedly spurred on by beliefs of the growing infant births in many parts of the world. China was singled out by management as a country of great market potential and one in which the company’s share was too low. Nestles clearly integrated population trends into the acquisition scenario.

Almost twelve billion dollars is a big bet by any standards, considering the vagaries of demographic forecasting. A back of the envelope calculation indicates the Nestles acquisition of twelve billion dollars will require the feeding of four million new born babies on a revenue basis only. Four million is about the current level of births annually in the United States.

One constant in many forecasts relies on the concept that a body in motion stays in motion until something stops it. Demographics are no different. For example if one was looking at population trends in 1900, the outlook seemed stable and predictions could be made with some certainty.  The British Empire remained robust, large families were the norm and migration to the new world’s frontiers continued apace. So what happened? By 1914 one of the most devastating conflicts in history killed millions only to be followed by a flu epidemic of cataclysmic proportions. Economic patterns were quickly changing including the decline of the British Empire.   An entire generation was severely effected by these events.

 The 1920s was a wonderful decade of enthusiasm and the demographers had another platform of stability to work from only to be side swiped by the Great Depression.  Subsequently World War II caused the greatest tragedy to world population since the Black Plague.

By the end of the Second World War fifteen years had passed with both very low levels of consumption and the accumulation of wealth with little to buy. Money, supply and optimism combined to unleash family formation and the on slot of the baby boom.

 Now consider another surprising set of events. Birth rates entered another decline  most likely due to  birth control, smaller and later families, life style choices, family costs and social norms. This time birth rates dropped as a result of personal choices, not wars, disease or natural disasters.

The art and science of demographics are not the problem. The discipline applies the best knowledge possible all the while assuming that a body in motion will stay in motion more or less. Excessive  reliance on this concept from physics is when trouble can ensue.  Forecasts  are just that; users  beware.

The post Demographictus Interruptus appeared first on Selkirk Portfolio Management.

Starting in 1500s waves of explorers stumbled on a cornucopia source of wealth never seen before or since. Earlier visits were sporadic, consisting of Norse explorers, a number of fishermen and perhaps Irish monks in leather boats.  This is one of the great historical ironies of all times as many of the adventurers had set upon the high seas  from western Europe with a completely different objective in mind. They were searching for the riches of South East Asia. Instead a huge land mass blocked their route. Eventually named the Americas, these two continents turned out to be an almost infinite reservoir of resources.

Perhaps for the want of a better name the land mass was called the New World as compared to their familiar Old World. Of course there was no difference in age between them. Although seen as new, North America and South America were well populated, prosperous, and dynamic. The major differences were the European’s abilities to win on the battle fields and to infect the indigenous populations with diseases for which they had no immunity.  The intervening centuries have seen so many tales of heart ache that the stories are prominent in today’s literature.

Motivations of the adventurers differed widely. Early on the Americas were the scene of the grab and run strategy. The invaders took everything from whales to beaver pelts, to precious metals to cod fish from both continents. Some came as settlers dedicated to establishing colonies in what seemed to be virgin territory. Samuel de Champlain is an example. Conquistadors such as Pizaro traveled to rob from the locals, keep a fortune for themselves and give the rest to royalty. All manner of religious groups came with other objectives.

For many centuries North America presented a barrier on the route to Asia, resulting in much travel and hardship. A number of these explorers had their journeys interrupted by ice or gale force winds became isolated and stayed because of no alternatives.  In keeping with the new start inspiration, lots arrived to escape from an untenable situation at home. Some adventurers came on a lark. Anthony Henday was likely one of these.

What does all this have to do with money, economics and politics? Apart from adventure, the answer is everything.  By way of reinforcement, imagine if you will that this colossal mass of wealth was the subject of a financial underwriting by the European banks and underwriters of the day.  A proforma cash flow statement would have captured only a miniscule part of the monies generated even without including that resulting  from  the ensuing population growth and  technological advances.

No earthly event of this nature has ever happened before nor will it happen again. Judicious exploitation is called for.

The post A Colossal Wealth Generator appeared first on Selkirk Portfolio Management.

So far we have had a good look at the issues being debated with respect to a radical change to the highway transportation systems in and around Mount Pleasant.

 Quantitative research indicates that a proposed highway route circumventing Mount Pleasant will have mostly positive economic results. Prospering business will not suffer, floundering businesses will continue to fail, and inner city traffic congestion will be substantially reduced.

The by-passing highway itself is another matter. Expectations for economic benefits run high, usually without substantive research either before or after  construction. Business development officers always rely on quality transportation networks to attract investment. New infrastructure never leaves their vocabulary.  To be sure we witness businesses of all descriptions springing up along new road ways.  Based on historical results, we expect net benefits.

A greater reach also indicates substantial positive financial out comes. The new transportation system contributes to prosperity over a large area, perhaps on a national sale as goods are shipped widely. Convenience, accessibility rapid shipping and low cost are all contributors. If economic benefits are the sole measuring sticks, then by-passes seem to be very beneficial. The dislocation and land usage negatives take a back seat.

Roads around and through Boston are successful mega projects. The building of Route 128 around the city was a bold move in the 1950s. When the same issues contributing to its construction re- emerged decades later, another by-pass was impossible.  Land acquisition, residential, commercial and business dislocation were insurmountable barriers.  An unlikely choice was to tunnel under the metropolitan area of greater Boston.

 After years of construction and billions of dollars this alternative became a reality. The Big Dig as the project became known transcends anything imagined fifty years earlier. This was the largest highway project in US history when competed in 2007 at a cost of 14.6 billion dollars.

While small by comparison, The Mount Pleasant project is a reminder of some of the consequences of economic growth.

The post If a New Highway is Built, Will They Come? (Chapter 3) appeared first on Selkirk Portfolio Management.

Civil Engineers from the Fransisco DeLuca College were engaged to conduct origin and destination studies at four locations throughout the effected area. Origin and destination surveys, in their simplest form, determine where motorists are coming from, where they are going and why.

The Tours Surs Les Bonbon was the first retail location selected. Over a period of a summer’s week a sample of customers were asked questions such as home location, how and why they selected this particular candy store, why they were in Mount Pleasant and their destination. In summary clients were primarily from Mount Pleasant and area and were returning customers. The region has many summer attractions resulting in lots of tourists. They also provide a substantial customer base, arriving at Tours Surs Les Bonbon because of a well deserved reputation for excellent products.

Albert’s Automotive Service Centre was next, conducted in a hostile environment because the owners remain very skeptical as to the intentions of the survey. In short the owners harbor the belief that the Government is doing a set up job and using a biased survey that would favor the by-pass. The results are very similar to the candy store. Customers are mainly local, although the range was considerably greater.

The Grow All Garden Centre benefit even more from  local clientele. Through traffic generates very little business. Not so surprising considering the intense home gardening imbedded in the local community

Research around the Evergreen Motel produces a different story. Over eighty percent of the clients in the sample week are travelers, stopping as a matter of convenience. On further investigation revenues had been in a decline for some period of time. Based on limited research, the owners believe the drop was due to less sales person traffic as they switched to the large chains. Tourist business was down perhaps because the motel did not have competitive facilities including a swimming pool and play area.

Assessment of vehicular flows on Mount Pleasant’s main arteries yielded data that 63% of the automobile and truck traffic were not stopping and had no need to do so.

Thus far specific conclusions are the following

• Businesses that are robust  will not be negatively impacted
• Businesses that are languishing will suffer further decline
• A by-pass will be reduce congestion on arterial internal road ways

A concluding article will be published in next week’s Observer.

The post If a New Highway is Built Will They Come? (Chapter 2) appeared first on Selkirk Portfolio Management.

Emotions are running high for good reason. A transportation reorganization of this magnitude will change lives.

The issue of highways by- passing communities is not new or diminishing; a direct result of economic development. A famous example is Route 128, constructed around the greater Boston area in the 1960s. One unexpected result was the relocation of enterprises along the route, many of which were founded by scientists and entrepreneurs from Harvard and MIT.

Mount Pleasant has no immunity to the outcomes of the proposed changes. Citizens throughout are voicing real concern with letters to the editor, social media and a string of forums. For example owners of the Tours Sur Les Bonbon, Celine and Rene Langlois are very worried about the decline of tourist traffic past their specialty candy store and the resulting threat to business.

 For three generations the Albert’s have operated a large automotive service centre facility on the main artery through Mount Pleasant. Rita Albert is certain the change will be the beginning of the end. On the outskirts the owners of the Evergreen Motel fear the same outcome as do Pat and Sean O’Brien. They own the Grow All Garden Centre at the intersection of regional highway 228 and the main highway.

Locating the new road generates an equal amount of controversy. New land has to be acquired from the agricultural inventory. A largely pastoral setting will be changed forever. Rural residences will lose some quality of life and perhaps be displaced. And of course the whole process is very expensive.

Impact studies are underway. The findings will be published in a future edition of the Observer.

The post If a New Highway is Built, Will They Come? appeared first on Selkirk Portfolio Management.

Beware; complacency can be a greater evil

The Canadian penny is a case in point. With the demise of the penny match, no one needs the currency any more. The result is the reduction of the maple leaf as one symbol of the Canadian identity.

Thieves drove another nail into the Canadian psyche with the theft of a huge amount of maple syrup. The stage was set because a marketing board saw fit to store excess product to stabilize the price. Unfortunately crooks  drained the storage tanks.  Imagine Canada without maple syrup or worse to have to buy it on the black market. An ancillary caution is to protect the national supply of pancakes, particularly as Shrove Tuesday approaches.

A recent news item reports that fire destroyed an Eastern Ontario factory which produced a very high quality cheese used for poutine production. Headlines screamed “Factory fire means poutine lovers facing withdrawal”. Further into the article is found “Once French fries and gravy are mixed with the cheese, poutine,  the Quebec-born signature dish is created”. Suppose Ontario now needs to embargo the export of the special cheese in order to protect domestic markets? This places the pipeline crisis into second place as a national issue

An under appreciated part of the hockey world is the traditional use of alley ways for hockey rinks. Winter time in Montreal releases these byways for other purposes. With winter’s arrival roughly 475 kilometers of back alleys which have inspired writers and artists over decades, become snow covered and deserted.  What better use than man made outdoor rinks? Authorities want to end this tradition. The extended hockey strike was bad enough, now practice rinks face elimination.

Poutine, maple syrup, pennies and hockey are bastions of the Canadian way of life. Dramatic headlines may herald good times; however the fine print spells out a different story.

The post Canadian Crises; Pennies, Poutine, Maple Syrup, Hockey appeared first on Selkirk Portfolio Management.

 The family home and  out buildings are substantial. Sound animal husbandry practices provide healthy cows, goats and chickens. Tangson created an enviable fresh water system.  Family members practice stringent hygienic procedures.  All of this is a result of cultivating corn crops year after year which support the family, provides funds for capital improvements and for education.   

Quoting word for word from  a recent communiqué  by members of Engineers Without Borders and a long term colleague of Tangson is the following “Improvements include solar panels on his roof, enough to power light bulbs at night and charge cell phones for his family and others in the village. He’s also expanded the cooking facilities for his first wife and plans to the same for his second. He owns a shop in the village from which he sells fertilizer and medicines for cattle. His children are older now and their English is very good these days.

 We found Tangson in the middle of the busy rainy season plowing,  planting and applying fertilizer. He’s planted a lot of maize this year along with soy and sunflower as he has found local markets for both. Over the years I have found Tangson has become more and more serious about his farming business. He does not take chances as much as before. Now he makes very calculated moves. I am impressed and have no doubt he and his family will continue to prosper in the years to come”.

Tangson is a community leader in every sense of the word

Where does the enterprise go from here? Mechanization is an obvious next step. One can easily discount this as a realistic plan considering limited financial resources and experience. Anyone betting against this outcome considering Tangson’ accomplishments to date?

The post Creativity, Resourcefulness and Hard Work are Where You Find Them appeared first on Selkirk Portfolio Management.

The efforts to secure sources of supply and make money are ever increasing. Universal search for materials of all kinds continues even to the point where space is contemplated as a source for many metals and minerals.

Non renewable energy sources have moved into centre stage. Economic and technical barriers to access are lowered relatively easily; political barriers not so much. A simple readership survey emphasizes how much the politics of fossil fuels dominates the world’s news. While many factors come into play, ownership of the resource is very high on the issues list.

World wide, the largest part of fossil fuel reserves are owned by agencies of the state.  Ownership fluctuates as privatization and expropriation wax and wane. Some jurisdictions have more or less stayed the course through out the history of the industry, notably Canada, the United States, and Australia. Quasi state ownership exists in many jurisdictions, including Norway and France.

Post World War 2  an innovative deal structure emerged in Indonesia with the Production Sharing Contract (PSC). A new concept where by the oil and gas assets remain under sovereign control. The exploration, production and marketing responsibilities go with the contractor. Production Sharing Contracts are widely embraced around the world.

The success of PSC‘s seems to be be a compromise between private and public ownership. Based on outcomes many  parties  embrace the concept in spite of ideological differences. Perhaps the buying angst is diminished and at the same time ownership and control issues have a reduced impact. 

The post The difference between buying commodities and controlling them is droll: one generates angst, the other matters of control appeared first on Selkirk Portfolio Management.