Crazy pills.

November 29th, 2007 by De Onion

One of the keys to American Republican style politics is to avoid serious discussion by inventing an enemy to fight and invoke that fight whenever challenged. In Republican America a vote for what we like to call “reality” means the TERRORISTS WIN!!

…and in 2007, judging from what I heard on the radio this morning if people are pissed off because a candidate (Jane Correia) is running for office in a government that faces serious allegations of corruption regarding contracts given to her husband’s company. THAT’S NOT RACISM! If people can’t believe that a Somersfield Academy parent would run for the PLP it’s probably because most Somersfield parents are dependent on international business and the PLP government is a threat to their livelihood. THAT’S NOT RACISM!

Am I taking crazy pills over here… probably, I’m starting to type like Tony Brannon. Please, let’s get rid of the American Republicanism, please?

Dr. Brown misleads the public. Again.

November 28th, 2007 by De Onion

In today’s Bermuda Sun Dr. Brown is quoted as saying:

The issue over cement supply reached a critical point in this country because a former government provided BCC with an environment that permitted it to hold the country at ransom – do business with us Bermuda or go without cement.

This makes him either a) incompetent, or b) deliberately untruthful and incompetent

The reality is that Bermuda Cement actually says: “Do business with us, import your own, or start up your own silo and compete.

Since nobody could startup or import in bulk without doing so at a higher price than Bermuda Cement that means that we have been getting the best deal from them. There are no capital constraints, there’s land available, it’s easy to ship here in bags. This debacle is the government’s fault. Plain and simple. Take responsibility for once. Clearly, even if Dr. Brown believes his own BS then the government should have been competent enough to avoid a crisis.

I am really at a loss to wonder if these politicians believe what they say and are simply too incompetent to recognize that they are spending millions of dollars of the Public’s money in the form of crippling Bermuda’s image of stability (which has huge value) in exchange for buying an amount of public equity (20%) that is worth less each year than the Premier’s personal spending.

Someone help me out. Please, explain it to me.


November 28th, 2007 by De Onion

So what’s the government doing here? Let’s see – they’re forcing out the owners of a natural monopoly because they can’t profitably pay a higher price on their lease or agree to the expropriation terms offered by the government. Then it appears that some friends of the PLP leadership will come in and take over the plant in a transaction subsidized by the government.

Given the record of this government on capital purchases, it’s safe to bet that the people of Bermuda are going to get royally screwed on this one. Royally. I’m taking odds on which of Ewart Brown’s golf buddies is behind Island Cement Ltd.

Profit is the same thing as simply not spending money in the first place, so if the government were at all interested in putting money into the pockets of the people of Bermuda then they would stop spending money like crazy! For example, saving $1,000 per year is exactly the same as earning 10% on an asset worth $10,000. So how about just not wasting money like crazy (like the emissions control plant and Faith Based Tourism) and bingo, you’ve done exactly the same thing as buying an asset worth many millions of dollars!

I have no problem with creating a public superannuation fund – ie. public shares in private businesses, but it should be done in a sensible way to actually add value. Since the government appears to be financially clueless, we should not expect them to be capable of doing that.

This whole thing stinks. The justifications are garbage. Even if in principle you think that it’s a good idea to tear down the old landed aristocracy, this is a) not the way to do it, and b) not the family to do it to. The Butterfield family are incredibly charitable, but unlike the current government leaders their motivations are not image or ego, which is why you don’t read on the front of the Royal Gazette about how they were installing water wells in Africa or bringing supplies to poor church groups in the Bahamas.

Anyone who thinks that old money runs this island needs to crack open a copy of The Bermudian from the 1960s or 1970s. How many of those old white businesses still exist?

Tourism attribution

November 27th, 2007 by De Onion

A good editorial by Alan Gamble raises the right questions about tourism….

I am still not convinced that the latest tourism numbers are really what they are made out to be. If one subtracts the regular business traveler and the visitors who come to visit guest workers, the repeat visitors to establishments like The Reefs and Cambridge Beaches plus the visitors generated by the Fairmont Group’s own marketing department from the overall total, it would appear to me that we are probably spending a lot of money per new visitor.

I would like to see categories of visitors which include ‘new visitors to the island’ instead of lumping all passengers into ‘air arrivals’. Only then will we really know if our huge tourism budget is money well spent.

So if the government were honest, transparent, and interested primarily in doing what is best for Bermudians then they would ensure a high return on taxpayer dollars.

How would a government do it?

Good visitor attribution.

Total air arrivals
– Locals
– People visiting friends/family
– Business travellers
– Long-term repeat visitors
– Visitors attracted by non-government marketing
– Other visitors not attracted by government
= Visitors attracted by government

Then you would take that number by the economic value added by those visitors (which is a function of both the revenue from visitors, tax breaks given, taxes spent, and the opportunity cost of resources) and divide the total value added of government attracted visitors by the real economic cost of attracting them. On a more simplistic level, it’s possible to simply divide the number by the tax spent directly – but this will likely underestimate the true cost as it ignores opportunity cost. A quick run of the numbers on Faith Based Tourism (hundreds of thousands of dollars spent, potentially as many as a few hundred tourists attracted) shows almost immediately that this was a bad investment by government.

The corporate finance guy in me wonders if there is some way to assign return on investment (ROI) to government discretionary programs as an independent office.

Debt markets…

November 26th, 2007 by De Onion

Things are finally going to start getting really exciting in debt markets – by which I mean that the average joe in the United States and other countries is likely to be seriously affected by a global loss of liquidity and a widening spreads as the losses from making loans to people who could only afford them in an up market begins to result in reduced lending by banks.

I have a strong suspicion that we are going to see a global slowdown over the next few years as a consequence of a contraction of credit as the effects of the misalignment of financial incentives that began in 2001 with a bunch of 22 year old Las Vegas mortgage brokers (who I used to drink with) throwing away risk controls during a bull market, which in a competitive oligopoly and a sustained bull market in real estate caused by low US interest rates caused by the American government’s inability to manage its taxation and borrowing in turn caused all the competing firms to drop their own risk controls in order to survive. I wrote about this a while ago.

The other reason that this real estate recession will be far worse than previous ones is that previously institutions kept mortgage debt on their own books, which gave them incentives to restructure loans rather than force mass foreclosures. It’s much better for a bank to lose 10% of the value lent by restructuring rather than the 30-50% they’re looking at losing in some markets thanks to foreclosures. This time around many of the mortgages are owned in separate structured investment entities that are not structured to allow for any decision maker to be able to restructure the underlying loans in the portfolio, leaving foreclosure as the only option…

But I have a sneaking suspicion that in 3-5 years buying property in the USA is going to be a great investment.

How to raise children…

November 26th, 2007 by De Onion

Quick link… because I’m super-busy.


November 24th, 2007 by De Onion

I disagree somewhat with The Limey when he says

Even when there are no immediate job losses in Bermuda as a result of these moves (as was the case with Butterfield Bank), there’s still an opportunity cost: any new positions that these companies create will be in the new location, not here. That’s no problem for Bermudians willing to relocate, but it doesn’t help those who want to stay here.

The departure has already started. That’s not scaremongering. That’s a fact. Even if the reasons are sometimes economic rather than political, the effect on Bermuda is the same.

He’s mostly right – I’m Bermudian and have been approached about working in a foreign office of a firm that is moving their operations overseas. There is some brain drain happening, but in general outsourcing to low-cost jurisdictions is not in and of itself a bad thing – indeed, London and New York seem to do quite well even though the bulk of many of their firm’s employees are in other lower-cost locations. In addition, for us in Bermuda it’s very much in the interests of the quality of life in the future to limit population growth on this island.

However, the important key are the reasons for population stability – in the end it will come down to cost. Companies will not come here when it’s more expensive to do business in Bermuda than in other places. It’s certainly in our best interests to maximise costs – indeed, at the moment Bermuda is a huge bargain compared to the United Kingdom.

What we need to do is make sure that Bermuda is expensive for the right reasons:
– People are very highly paid.
– Prime office space is very expensive. (good if it’s owned by Bermudians)
– It’s necessary to attract locals from other local companies in order to grow.
– It’s only possible to import people at very high salaries.
– There is a fantastic education & social system.

It’s vitally important that Bermuda isn’t expensive for the wrong reasons:
– Government is arbitrary.
– Government is inefficient.
– Legislation is not competitive.
– Foreign staff are not welcome.
– Compliance with quotas is burdensome.
– Immigration is slow and arbitrary.
– Top calibre people don’t want to work in Bermuda.
– Government is corrupt.

In defense of a blogger

November 23rd, 2007 by De Onion

I think these nasty anonymous comments on the blog Bermuda: Str8.nochaser are completely inappropriate.

Yes, the author of that blog and his letter writing mother are very offensive much of the time and have a history of extremely personal harassment of people with whom they disagree – which is why I recommended that readers post anonymously. Anonymity does not give license to be an idiot and it is completely inappropriate to try and beat him at his own game.


November 22nd, 2007 by De Onion

Given the recent statements by some that the government is able to “run on its record” I am tempted to post a list of government scandals/wastes…

New Onion Dept. of Perspective

November 21st, 2007 by De Onion

The cost of not thinking things through…

The reporter forgets to notice that were Mr. Peets trying to start up his business today as a 25 year old he would be unable to get a commercial vehicle permit and would have to pay full price for a private car because of Dr. Brown’s ill-conceived moratorium on truck permits.

Light posting for the next two weeks… because it’s 11:18PM and I’ll be up in 6 hours to get back to work. December 2 I’m going to get back into it.