An Open Letter to Tim Hudak about the LCBO

December 4, 2012

Timmy:

So today, you resurrected the old idea of selling the LCBO.  Timmy, it would be nice if you checked the facts and figures before spewing your dogma.

But first, Timmy, ask yourself why your predecessors failed to do this, if it was such a great idea.  Here’s a clue:  It wasn’t a good idea!

Let me explain this to you.  The dividend that the LCBO pays to the Ontario Government is a Growing Annuity.  Since 2001-02 that dividend has had a compound average growth of almost exactly 6%, and that record of growth actually goes back many years, as I did a similar analysis years ago when Mikey Harris’s Common Sense Revolution didn’t.  Can we value this growing annuity?  The formula for the present value of a growing annuity is PV=PMT0(1+g)/(k-g), where PMT0 is this year’s payment, g is the growth rate and k is the discount rate.  As of yesterday, the yield of Ontario Government 25-year bonds was 3.44%.  Hudak, we have a problem!  The discount rate, the yield on long-term government bonds, is less than the growth rate, so the formula doesn’t work.  What does that mean?  The cash flows being generated by the LCBO are growing faster than the interest cost on the debt.

Let try some different assumptions.  Let’s assume that the current interest rates are depressed from normal levels, so let’s just assume 8%.  Furthermore, let’s also assume that the growth rate of the dividend from the LCBO falls back to 5%.  Now we can try to use the formula.  The most recent dividend from the LCBO, in 2010-11 was $1.55 billion, so we would estimate that for 2011-12, that will grow to 1.625 Billion.  Using the formula, PV = 1.625(1.05)/(8%-5%) = $56.875 Billion.  Do you really think that you can get $57 Billion for the LCBO?  I will bet you my house and pension fund that you would not be able to sell it for even half of that!  If sold off to create a competitive marketplace, no rational investor will imagine that the monopoly profits the LCBO is able to earn will continue.

And don’t forget, that if the prices do come down due to a competitive marketplace, then the government’s share of HST revenue will shrink as well.

Before you accuse me of being some left wing rabble-rouser, like your acolyte Bobby Ford, check your facts.  I am a fiscal conservative and former PC party member that has not been able to bring myself to vote for the mindless intransigence of the party since the Harris days.

Krusty

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Rob Ford and Bullying

November 13, 2012

Monday, Rob Ford, Mayor of Toronto, is at an event to support Bullying Awareness Week, at which he said,  “There are many different types of bullying, but being called fat, all that stuff, it bothers you, but you have to deal with it.”

This is happening the same day that Michelle Berardinetti, a Scarborough councillor quits the City of Toronto’s Executive Committee “…because she is tired of being pressured to vote with the mayor,” according to the Globe and Mail.

“I expected a degree of autonomy,” Ms. Berardinetti said Monday. “I was told that it would just be key votes. So when we started and it became every single vote, I had real problems with that.”  (Quote taken from the Globe and Mail)

So Rob, it looks like you can dish it out but you can’t take it.  Stop being a bully Ford!

Volkswagen Golf TDi

October 26, 2012

I drive a fair bit, about 40-50 thousand kilometers each year, three-quarters of it highway.  My last car got reasonable mileage, but when it was time to replace it, I opted for a Diesel due to the superior highway mileage.  There are not many companies making Diesel-powered cars for the North American market.

Why didn’t I choose a hybrid?  First, the price differential on the hybrid and a regular engine is far greater than the Diesel-gas spread.  Second, hybrids sacrifice a lot of trunk space to fit the batteries.  Third, there is the uncertainty with the life of the batteries and when they need replacing, I cannot imagine that they are cheap.

My Golf TDi came with VW’s Direct Shift Gearbox (DSG) Automatic transmission.  Yes, I know that a stick is more fun to drive, particularly with the amazing torque that the Diesel engine has, but when I get stuck in stop-and-go traffic (“Hey Toronto, have you driven the 401 lately?”) my left hip gets quite sore.  Yes, I drove a stick for seven years.  Back to the DSG.  If you are an aggressive driver, the DSG is an amazing transmission.  There was an episode of the British driving show “Top Gear” that staged a drag race between two identical VWs, save for the transmission:  The host, Jeremy Clarkson, drove the DSG and Stig, a professional race car driver, drove a stick.  The DSG won handily.  It’s a dual clutch automatic that times its shift perfectly.  It is a derivative of a Porsche design for race cars and is an engineering marvel.

However, if you are a middle aged, careful driver who is adverse to racing along residential streets at more than 50 kph, the DSG will drive you bonkers, if not shake the living crap out of you.  The DSG cannot decide which gear to be in and shifts back and forth, doing its worst to simulate the effect of a 16-year-old attempting to drive a standard for the first time.  I’ve asked my dealership to do something about this every time I’ve been in for service and the problem persists.  I even had one service adviser say that nothing could be done, that’s just how the DSG is and get used to it.  One time when I pushed for a solution, a service adviser decided to check to see if there had been a programming upgrade and found that there had been one issued months earlier and had been available during several of my service appointments.  (It’s nice to see the other advisers had been so attentive.)  The programming upgrade did not alleviate the problem.

The last time I was in, the service adviser said, “You’re overdue for a transmission flush,” suggesting that would cure the problem.  (It didn’t.)  I knew nothing about this service requirement.  When I buy a car, I ask about the full required service routine and was told nothing about the transmission flush.  In fact, it wasn’t even on the board outlining the required service and maintenance that hangs on the wall of the service department.  This service is required on the DSG every 60,000 km and costs $500.  I drove my last three gasoline-powered cars between 250,000 and 300,000 km, and I expected to drive the Diesel about 50% farther, given how Diesel engines last.  This transmission is going to cost me more than twice what I paid to get a Diesel.

Don’t bother speaking with the Service Manager.  It seems that their sole responsibility in life and to the dealership is to make lame excuses.  I’ve never met a service manager that could manage to produce service or had a clue what customer service is.  (My last four cars have all been different brands, and I’ve encountered close to a dozen service managers;  they’re all cut from the same cloth.)

And here is a final, minor annoyance.  In my past three cars, each driven 7+ years, I have only needed at most two sets of floormats,  The VW mats have worn through in under two years!

The dealership will not be getting me for any more service calls, unless a recall or warranty repair, and Canadian Tire will be my source for floormats.

“Das Auto? Nein, Das Scheiße”

Shoppers Drug Mart

October 26, 2012

Most SDM stores have been renovated so that when you enter, you have no choice but to go through the Cosmetics Department.  Why is that necessary?  It is an assault on my sinuses and sometimes, when I forget to take a deep breath, I have an allergic reaction.  I suppose they want me to run over to buy an antihistamine!  Many workplaces have restrictions on the wearing of perfumes and colognes, but SDM needs to inflict this on every customer.  I suppose with the insanely high margins are on this crap, it makes sense to try to direct traffic to entice people into buying.  Department Stores like The Bay do the same thing:  The first few acres as you enter from the mall are cosmetics.  Narcissism is hugely profitable for the retailers.

Lately, it seems like SDM has replaced all their personnel in supply chain management (SCM) with the people that messed up Loblaws SCM and were recently laid off.  I cannot believe how many empty spaces there are on the shelves.  I swear, at least half, maybe two-thirds of the razor blades were out of stock and many that were there did not have shelf tags to tell you the price.

SDM’s house brand, Life, has two 908g bottles of Whey Protein.  One has a big “24g” on the upper right corner of the label and the other has “37g” in the same spot.  I normally buy the 24g product, but one day, it was not in stock so I bought the 37g product.  Guess what I discovered?  The only reason there is 37g of protein in each scoop-sized serving of the 37g product is that the scoop is 50% bigger.  I compared the nutritional  labels:  Calories, Sodium, Potassium, EVERYTHING, was 50% higher.  The products are identical, except for (1) the scoop size and (2) the price.  Yes, they charge $5 more for the same volume and weight of product with the larger scoop.  What a ripoff!

Finally, customer service is non-existent, except in cosmetics, of course – those products have the margins.  I looked for someone on the floor to help about something that was not on the shelf and I was directed to the pharmacist.  I was reasonably sure the pharmacist wouldn’t be able to help me, but she dutifully paged a merchandiser, not just once, but three times (!) before someone came out from the back to assist me.  In the meantime, there are two cosmetics consultants standing there chatting with each other.  Heck, if I couldn’t find my mascara, I’d have been helped in no time!

They should change the store name to Shoppers Cosmetics Mart and Wannabee Grocery Store (Oh, and we do have a Pharmacy at the back)

Two Restaurant Pet Peeves

June 26, 2009

Peeve #1:

I love water. It is my favorite drink. I rarely drink anything with alcohol in a restaurant, I avoid carbonated beverages, I don’t like sweet drinks and I don’t enjoy juice with any meal except breakfast. My drink of choice is ice water. What peeves me is the often not-so-subtle reaction that I get when that’s what I order to drink.

Yesterday the water that I got was about 15C. I asked for ice water and got a glass with maybe three small ice cubes. This isn’t the first time that I have been punished with poor service when I’ve ordered water. Is it policy that customers that don’t order drinks are to be punished this way, or is it the server thinking, “This cheap bastard isn’t ordering a drink, so I’ll get a smaller tip!” (The truth is, when the bill comes, I add the cost of a drink and it’s tax to the bill before calculating my tip, unless this has happened.)

On the other hand, I have had some servers offer to leave a pitcher of ice water at my table, if I wanted.  They get a good tip, because they deserve it;  they understand the importance of customer service.

Peeve #2:

Lately, I’ve been faced with the uncomfortable situation of being seated by a amply-endowed young woman proudly displaying her bosom on a few occasions. Why is this necessary? If I wanted such a display, I’d go to Hooter’s. I don’t consider myself a prude, but there is an enormous difference between an attractive bit of cleavage and a massive showing of the Intermammoral Canyon©. Am I supposed to overlook substandard food or poor service for the opportunity to look some young girl’s breasts? They even seem to act like sex-workers: they greet you with a forced half-smile as if to say, “Hello, these are my boobs. Aren’t they lovely? Now if you’ll follow my swaying ass, I’ll lead you to your table.”

Here’s some old news: Sex sells, to some at least. I don’t buy, however.