E-letter: Time to put it down

Statistics Canada last week came out with its reports on residential and non-residential building.

Looking for a moment at Residential report and expanding StatCan’s numbers back to 2009, we can see spending on all types of new dwellings was a bit over $8 billion in the second quarter (Q2) 2009. In Q2 2014, five years later, spending increased to $11.6 billion, or an increase of 30 percent, quarter-to-quarter.

Way down the chart, same timeframe, we can see Q2 2009 spending on Renovations was $10.8 billion, or 25 percent more spending on Renovations than on all new, residential building, combined. In Q2 2014, Renovation spending also outpaced New Building, $13.4 billion versus $11.6 billion, or 13 percent.

Although New Building spending outpaced Renovation spending in some fiscal quarters between 2009 and 2014, the general trend was up on average $11.2 billion Renovation versus $10.7 billion per quarter New across the entire timeframe, or five percent. We have posted raw data: Renovation and New Building and a graph: New building and reno activity 2009-2014.

Kerry Knudsen

Kerry Knudsen

There is a hidden number, here, that we cannot currently get access to. That is, our sector makes its living on what goes inside the external structure of a building, so the number we need to see to understand better our own benefit or loss is the new building cost – X, where X is the amount of the external structure. This would yield a Y number, where Y is the remaining value, including cabinetry, doors and windows, flooring, bathroom fixtures and so on, which would include our sector as a part. Just for kicks, let’s say in a new residential building, Y is 50 percent. The structure, siding, roof, etc., is half, and the rest is half.

Now, in Renovation, much of the external structure is left intact. The amount would vary from project to project on the one hand, but the Renovation amount may include such permanent and semi-permanent costs as rugs, fireplaces, entertainment cables and so on, that would affect the percentage of renovation revenues that would otherwise be attributable to non-structural revenues. The number of dollars that would go to our sector from Renovations will be Z, but let’s say it’s Y. That means we are valuing both new buildings and renovations equally for the sake of argument in terms of percentage of revenue. You will need to consider what percentage your customers are budgeting for your products.

It is easy to pick on the builder market (new buildings) as a closed system with low margins and low flexibility. However, the existence of a strong builder market does not affect the custom new construction, and it certainly does not dictate the ranges or prices of products and services in the renovation market – a market already shown to be equal to the new building market, within five percent over time – and a market that should have equal or greater demand for our sector based on percentage of gross revenues.

Yesterday’s Building Permits report from Statcan says Canada issued building permits worth $9.2 billion in July, up 11.8 percent from June and the fourth consecutive monthly advance. The increase in July, Statcan says, was mainly attributable to higher construction intentions for multi-family dwellings in Ontario and British Columbia, as well as institutional buildings in Manitoba. With building permits as a barometer of building intentions remaining at record levels, and with the historic tracking of renovation spending along with new residential buildings, it is very difficult to see any short- or medium-term downside in our sector.

 

 

So let’s move on to war. The world’s most-famous Montague, Romeo, was caught talking to himself one night in a rose garden: “What’s in a name?” he famously mused. “A rose, by any other name would smell just as sweet.” So what would be another name for ISIS? ISIL? IS? Islamic State? As with Romeo, this is not a moot question. The current disruption in the Middle East is going to affect business and politics for a long, long time. Especially if we don’t know what to call it.

Let’s take a shot. Hand-in-hand with the label ISIL (or whatever) is the word terrorist. U.S. government sources say terrorist. News anchors say terrorist. Obama says terrorist. Watching TV is like watching Bobblehead Barbies programmed to say terrorist, but the word seems to include everything from a kid making firecrackers to suitcase nuclear weapons. Actually, the word “terrorist” has been in use since the late, late 18th Century. The French Revolution, to be exact.

My mind is seared with the news image of a maggot with a knife, wearing his black wedding veil, standing threateningly over a captured and defeated journalist. I have not watched the executions, and will not. (I also seem to be in a minority of people that have not seen Jennifer Lawrence nude.) It is not necessary, I think, to watch executions, but it seems necessary to have a perspective. For example, the orange jumpsuit of the condemned man is said to symbolize the prison garb at Guantanamo Bay. Last week, ISIL further condemned 250 fellow Moslems, stripped them to their underwear and marched them to their own collective grave, where they were shot in the back. ISIL, to whom looks are important, also seems to shave heads and beards of those it condemns. They should have read that real men see back-shooters as cowards.

 

 

To me, the word terrorist does not fully fit, since my understanding of a terrorist is of a fanatic or small cell of fanatics committing fearsome, cowardly acts by surprise against innocent civilian populations for the purpose of disrupting transportation and commerce. Correct or not, that was the definition they gave us of themselves back in the Arafat days.

Please remember that I am just a trade-magazine editor for a small audience in Canada. I am not an expert in foreign policy. That said, these ISIL guys don’t invoke Islam or fanaticism so much for me as they do an organized gang of monsters committing ghastly perversions of every imaginable sort. To me, their proper name is older than terrorist. I think they are just a plain-old mercenary army.

Since time began, the problem with the mercenary armies has been the difficulty one has in controlling them. While cutting off heads and burning women and children has not, historically, been the purview only of mercenary armies, mercenary armies are certainly associated with those actions, and others. This is because, while mercenary armies have always attracted the young, the innocent, the faithful and the broke, they have also attracted the most perverted trash any society has ever spawned. Historically, mercenary armies have been survival pockets for the world’s rapists, serial killers, torturers and cannibals. If Robert Picton had only made it to Syria, he would be free. Not safe, but free to do as he liked. Imagine a legion of Pictons, Mansons, Olsons, Dahmers, Gacys, Bernardos and Homolkas. What you have there is not an anarchy of dedicated fanatics. You have the Army of the Damned.

To my mind, this distinction is significant, if only because our governments are not talking that way. They seem focused on defining the conflict as geo-political, as if it’s analogous to Afghanistan, Iraq, Libya, Somalia and so on…. Or as if it’s directly Islam. It is, but it’s not.

 

 

Rabies has ceased to impress Western culture. When it did, people knew rabies and they knew the treatment. Rabies crosses species lines to affect dogs, pigs, cows, skunks, cats and so on. When you see a rabid cat, you shoot it. You don’t shoot it because it’s a cat. You shoot it because it has rabies. You can tell it has rabies because it is acting in a ghastly manner not typical of cats, it is frothing at the mouth and it lives in an environment where rabies has been identified. Walt Disney released a movie about rabies, grief and manhood in 1957 called Old Yeller. It has not had the longevity of his other movies, I assume because this one had a point.

In the Levant, at the moment we can clearly see two facts. The Gee-Hodders are racially identifiable as being Middle Eastern, South Asian, African, Anglo-Saxon, Latino or Chinese. They are religiously identifiable as being Muslim or of claiming they are Muslim to suit their own designs. This means we don’t have a prayer of identifying them by race or religion, which is sort of a relief. In addition, we cannot ask the Muslim community to investigate or report on radical members, because the fanatics will cut their children’s heads off if they do.

Therefore, a traditional, geo-political military solution won’t likely be the complete answer. Obama this week said we will be facing the management of ISIL for years. However, the history of Western armies fighting in Iraq is otherwise. It takes a Western army about three weeks to conquer the whole thing. Wiping out rabies takes longer, but conquest should cut down the headsmanship.

To my thinking, the military solution would be a grand start, and the sooner the better, but it won’t be the complete answer. One of my favourite authors, Chairman Emeritus of the Department of Economics at George Mason University Walter Williams, once characterized the military option. He said everything is economics. Stealing is economics, and it operates on an economic, cost:benefit ratio. If you make the cost exceed the benefit, the behaviour stops.

In the military context, there is nothing new about this theory. Militarily, the commanders-in-chiefs of the civilized world could speak with actions rather than words, and when an innocent group of cultural Christians gets burned alive, crucified, decapitated, forcibly converted and raped, a military response will work. American citizens in the ‘40s did not want to see German saboteurs executed and did not want to see Dresden bombed. I would not, had I lived then. However, it seems it was clear at the time that folks knew not killing would lead to more killing – the Devil’s very own dilemma. Take your surgery now, or take it bigger later.

Anyway, the military option is what it is, and it won’t be the complete answer. Cameron and Harper seem to have got it right. We have to pussy-foot around soft sensibilities at home in order to save society, and we need to understand that people of a religious group, a country or a skin colour will be neither the answer nor the problem. However, the problem is linked to a culture that promises whatever these mercenaries are promised: fame, money, power, blood lust, pillage, sex…. I imagine the list is endless and may include the satisfactions of pride, envy, wrath, sloth, avarice, gluttony and lechery.

 

 

If Harper and Cameron are right, and if this is a cancer, it has metastasized and it will be eliminated or allowed to spread. There is no third option. Therefore, if somebody likes gee-hodder snuff videos, pyrotechnics, black flags and martial arts, he or she certainly has a Canadian right to do so. But at this time you must consider that Canadians may see those symptoms as foaming at the mouth and convulsions in a very sensitive environment

So far, the terrorist side has been effective in its stated goals of disruption commerce and transportation, leaving us all holding our shoes and having our bodies probed on our way over the river and through the woods. We are paying heavily to trade across borders or support our faiths. But the introduction of the mercenaries is a game-changer.

My favourite Chinese proverb says the beginning of wisdom is to call things by their right names. Romeo was not so sure, and the cost to the families was devastating. This time, whether the “enemy” is fanatic, psychotic or some incubus cocktail of the two, that enemy has made it clear somebody will kill it now or kill it tomorrow. Debating whether it’s geo-political or religious is nonsense. It is madness.

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