The oh-oh 00s

Bull and bear, terror and war--we're living through some spooky times

Some of us were too embarrassed to tell how, on the eve of Y2K, we filled every available vessel with water, stacked the cupboards with tinned food, fetched wood for the fireplace, emptied the ATM and detached the PC.

So, when the computer-driven delivery systems for water, power, fuel, money and information did not crash upon the dawn of the triple-zero New Year, we privately excused ourselves for panicking. We still blame back-of-the-mind remembrances of all those credible new-millennium disasters foretold in the old century's science fiction. Not to mention the reinforcing warnings that total shutdown on Jan. 1, 2000, was as certain as the reality that the 1900s — when all computers had been programmed, mind you — were fading to black.

Vivid in the memory was the plausible account in 2001: A Space Odyssey, by Arthur C. Clarke and Stanley Kubrick, of the rebellion by HAL the computer (its name, by the way, the alphabetic letters preceding IBM). If HAL could go all human and bossy, as he fatally did in that 1968 book and film, why couldn't our machines ignore orders from the Command and Control keys? Or because their chips wouldn't know how to cope with time measured by dates with all those zeroes?

In any case — although strictly speaking the 21st century and the third millennium A.D. didn't truly start arithmetically until 2001 — the real-life shocks to the mind, body, spirit and purse in those startup stages of the 2000s are sure to make us look back on them at best as the oh-oh-oh years.

We painfully recall the way investors in the electronic communication industries proved ungrateful for the good computer behaviour during the Y2K transition. Dumping stock in those sectors became a rush before the new millennium was into its initial summer.

And then we saw how bursting the tech-stock bubble proved contagious, dragging down markets and economies in the new decade's early years for the third time in a row, if not as steeply as in the 1981-82 and 1990-91 recessions.

Not only did savers and investors lose lots of money before the markets began recuperating in late 2002, but Canada and much of the world, meanwhile, had to deal with in-our-face realities as scary as the spooky things predicted for our times by clairvoyants of the 1900s.

The event never imagined in the wildest of such scenarios, of course, was the calamity christened “9/11,” the code that still bespeaks the shock, the pain and the anger churned up by the airborne acts of suicidal terror against the United States by fundamentalist Muslims on Sept. 11, 2001.

The life-will-never-be-the-same-again anxiety provoked by the assaults on symbols of America's commercial and military superiority received apparent confirmation from the fundamentalist Christians in charge of the United States. It was vengeance by the sword and, in choosing targets, the avenger assumed the right to referee the sort of government and the kind of weaponry other nations are permitted to possess. In its declared War on Terror, Washington indeed appeared intent on making the new century the founding time of an American empire with a global reach.

But perhaps now that's not to be. By 9/11's second anniversary, developments and diversions raised questions about whether much was changing after all. Argument over the invasion of Iraq now seems merely to turn the situation into a repetition of America's expensive, divisive and fruitless Vietnam War years of 1965-75 rather than something historically unique.

And as the killing in Iraq raged into November, and the U.S. budget deficit soared to troubling heights, events elsewhere have begun to prompt questions about just whose century this is really likely to be. Prominent candidates are the quarter of the earth's population living in thriving China, sponsor of an inaugural manned space flight in mid-October and self-confident enough to shrug off U.S. pressure to revalue its currency in favour of competing traders.

As for Canada, our recent blighting domestic disturbances — Air Canada's filing for bankruptcy protection, the SARS outbreak in Ontario, the mad cow case that cut off cattle exports, British Columbia's fires and floods, hurricane Juan in the Maritimes — drained urgency from the War on Terror. Ontario, along with its American neighbours, also took a hit from a mid-August electricity shutdown for two or three days. For its more paranoid residents, the outage provoked notions of future calamitous breakdowns produced by ecological ruin on planet Earth — notwithstanding the Kyoto cleanup accords, as ratified by most countries, but not the United States, the biggest emitter of polluting greenhouse gases in the world.

It was thus cold comfort when groping around during the August blackout to stumble into those big vessels of water left over from the anxious days before the arrival of Y2K.

Excerpts from the pages of Canadian Business

Is there a tunnel at the end of that light?
by Brian Banks

After several hard weeks of preparation for this year's Economic Outlook issue, it's hard not to shake the feeling there is something we've missed, some indicator out there amid the bullish growth forecasts, roaring trade numbers and delightfully low inflation and unemployment levels that would suggest trouble ahead. Can things really be this good?…[W]e made caution the watchword of last year's Outlook. How wrong we were….[W]e were guilty of underestimating the strength and resilience of Canada's economy….With the economy so strong and almost everyone in Canada having such a good time, who wants to be wrong again?
—Vol. 73, No. 1, Jan. 10, 2000

Nortel still looks like a great buy — if you haven't done your homework
by Al Rosen

It's easy to understand why Nortel Networks Corp. is Bay Street's darling. Over the past year, the global telecommunications giant's stock price has shot skyward by 230%, pulling the entire TSE 300 up with it. And the news just keeps on getting better. In April 2000, Nortel reported that its first quarter revenue was up by a whopping 48%. Immediately after the announcement, analysts started gushing…If these analysts had done their homework, they might have come to a very different conclusion….

They are too smitten with Nortel's separately reported first quarter “operating” results — which ex-clude the acquisition costs the company incurred to boost its revenue — to be worried about really important matters. All of which makes you wonder if the legions of analysts who are in love with Nortel today will be feeling jilted a couple of years from now.
—Vol. 73, No. 10, May 29, 2000

Sticking it to Uncle Sam
by Kevin Libin

It must be humbling to be a Canadian trade negotiator, forever bargaining with an 800-lb. gorilla. What to do when the US slaps your softwood lumber with punishing duties? The dispute has been dragging on since March, with no end in sight — though the prime minister has bravely told us he'll turn off our energy exports to the Americans unless they play ball….Not only would [that] violate NAFTA, but an export-driven economy threatening to cut off its nose to spite its face is truly hilarious. US energy sales bring in about $43 billion annually….Yet we count only for roughly 15% of US oil imports…

Jean Chrétien may not realize it, but we need Americans to buy our energy a whole lot more than they need us to sell it. And not just Alberta. BC, already reeling from the softwood mess, earned more from energy last year than from forestry. So how about another, equally sensible plan — like cutting off PEI potato exports instead? That'll teach that gorilla…
—Vol. 74, No. 23, Dec. 10, 2001

Up in the clouds: Is Air Canada's soaring share price really justified?
by Peter Verburg

Investors have taken a renewed interest in Air Canada stock. Since hitting a low of $1.64 after Sept. 11, the share price has more than quadrupled to the $6.60 range….

Over the past two years, Air Canada has sold close to $1.8 billion in assets, leaving just $2.8 billion in property and equipment on its bal-ance sheet at the end of 2001. If the current trend persists, they'll run out of stuff to sell….

Air Canada is carrying a massive debt. It also has negative equity to the tune of $938 million. That means the company has more obligations than resources; its book value (assets minus liabilities) is negative. Why, then, should its common shares be worth anything? The answer can only be found in the fact that Air Canada has a near-monopoly over long-haul travel in Canada. Investors are essentially betting that it will prosper in the long run simply because it's the dominant carrier. What you're paying for, at $6.60 a share, is essentially the captive audience and, ahem, goodwill.

Is this a wise bet? Tough call. Air Canada may well limp along and keep its head above water. A strong economy may even allow it to prosper some day.

But recent strategic moves by [CEO Robert] Milton do not give us hope. In particular, Air Canada's decision to mess around with its brand is puzzling. It recently placed its regional subsidiaries, including Air BC and Air Ontario, under a new umbrella called Jazz. Before that we were introduced to Tango. What's next? Foxtrot? How about Limbo?
—Vol. 75, No. 8, April 29, 2002

Groovin' up quickly: With Nortel's stock up 800% in a year, has it all come together for CEO Frank Dunn?
by Andrew Wahl

What a difference a year can make. Last fall, investors were fretting that Nortel Networks was going to drain its $4.8-billion cash reserve and declare bankruptcy. Now, the company is rocking the TSX after a series of big-money, multiyear deals have sent its stock on a tear….Since Oct. 10, 2002, when it bottomed out at 67¢, Nortel's stock price has steadily climbed…to as high as $6.50….While that's still several fathoms below its all-time peak of $124.50 on July 26, 2000, the deals have clearly piqued in-vestors' interest in Nortel again.

The big news, announced Sept. 3, was a US$1-billion contract for next-generation wireless infrastructure equipment with Verizon, a US cellular carrier….Nortel followed up that victory with another deal for wireless gear, this time with Orange SA, a unit of France Telecom, worth a reported $1.5 billion…

CEO Frank Dunn has managed to stem the deluge of red ink, stabilize the business and essentially break even in the first half of this year….

Nortel's recent deals don't make it worth buying on its own. But they do indicate a reason to have hope. And judging by the stock's recent run, investors are willing to pay a healthy premium for that.
—Vol. 76, No. 19, Oct. 14, 2003