This is how you Bulldoze a mountain

It apparently took 30 days to approve the massive USD$3.5 billion construction project near Lanzhou, China. I’m pretty sure the environmentalists have been properly consulted because I would love to see the environmental assessment. They planned to flatten 700 mountains. The picture below shows you what you need to get it done. It looks easier than designing a city at SimCity.

China to flatten 700 mountains for new metropolis in the desert

Photo credits: ImagineChina Neil Harris

Relationship between the US dollar and Oil prices

There’s an inverse relationship between the US dollar and oil prices. Actually most commodities typically follow and inverse relationship with the value of the dollar. When the dollar strengthens against other major currencies, the prices of commodities typically drop. There are many reasons on why the US dollar has an impact on commodity prices, but one of the main reason is that the barrel of oil is price in US dollar. A weaker US dollar translates into a higher oil prices. I have obviously dumb down the example as it can get much more complex with so many other variables such as interest rates. Anyway I though this chart was pretty interesting, I decided to share it.

US DOLLAR INDEX vs. WTI Crude Oil Photo credit: Bloomberg

Photo credit: ForexKarma

Fact of the day: 1 barrel of oil = 158.987295 liters or 42 US gallons.

Group Jean Coutu: An Update For The Patient Investor

This is just a sample. The full article is available at Seeking Alpha.
Reposted from Seeking Alpha
By Brian Langis

Note: Dollar amounts are in Canadian $ unless mentioned otherwise. USD-CAD 1.1228 Price of 1 USD in CAD

Group Jean Coutu (OTCPK:JCOUF) (PJC) was one of my better investments last year. My initial research article, Group Jean Coutu – An Opportunity For The Patient Investor, I made the case for investing in PJC. It’s much easier to pick a winner when management tells us exactly what they are going to do when they announce a capital return plan upward of $500 million in share buybacks and special dividends. This article is an update; therefore I suggest reading the original research to have a better understanding of PJC.

Investment Summary

Please note that the actual publishing date was October 24, 2013 but it was written before. The actual returns described below represent a full year but is three days short of the publishing date.

PJC1PJC.A +37.74% vs. JCOUF +21.33% vs. TSX +10%, Oct 22, 2013 – Oct 21, 2014. Source: Google Finance


If you held the Canadian version, PJC.A, your investment is up 42% including dividends. This is superior to the 10% the TSX provided and my own initial valuation. If you held the American version, JCOUF, your returns were negatively impacted by the drop in the Canadian dollar. However, with a 26% return including dividends, it’s still respectable and superior to the S&P 500. PJC also increased their quarterly dividend 17.6% from $0.085 to $.10.

My approach to investing in PJC is similar to the one I would take if I would be buying a private enterprise. PJC has the characteristics of what I’m looking for: a good old cash rich drug store retailer with solid reliable free cash flow, no debt, modest growth, heavy insider ownership, long-term potential, and that provides goods and service essential to the community. In today’s investing environment, PJC would classify under the boring investment tab and that’s not a bad thing.

With a 40%+ return, you would have thought that PJC is a sexy high flyer stock. Anybody that is familiar with the company knows that’s certainly not the case. Group Jean Coutu is a snail. It’s slow, but steady and consistent. PJC’s lack of an “aggressive” growth plan really bugs analysts. When you listen to the analysts’ conference call, they always sound so disappointed that management didn’t declare some big splashy news or some kind of enormous acquisition. It is indeed for the patient investor. The analysts also weren’t impressed with last year’s massive capital return program because it wasn’t sexy enough. It’s mind boggling that the stock price lagged for a while after they repurchased $400 million in shares. PJC did make the analysts happy at one point when it went down the “flashy road” in 2004 with the mega acquisition of Eckerd drugstores in the U.S. That turned out to be a disastrous blunder. Now PJC is buying one store at the time. Francois Coutu, the CEO, wants to get to 500 stores within five to 10 years, both by buying independents and building new stores. I agree that it is a torture to see PJC open only a few locations a year with a little bump in same-store-sales (SSS), but I’d rather be safe and steady than reckless.

PJC Financial Summary


Full article at SA.



Nike New Hockey Skate For Toronto Maple Leafs

Leaf Nike Shoes

The Pittsburgh Penguins are a first class organization.

Penguins - First Class

The Pittsburgh Penguins are a first class organization. They honored today’s fallen Canadian soldier by playing “O Canada” before their game tonight. It’s nice to see a sense of unity.

Video credits: NHL

The Montreal Tax

Montreal Forum 1989, Getty Images

Montreal Forum 1989, Getty Images

My brother sent me this article to read posted on TSN by Rick Westhead, “Westhead: Why Montreal is the worst NHL city…when it’s tax time”. Well the title of the article is not shocking to anyone, what is shocking is that nobody seems to be talking about one the main reason why Montreal has difficulty attracting top talent.

Combine the rich history of the Montreal Canadiens, the pressure, the media, the over-zealous fans, the French environment, and the beautiful complicated province of Quebec, it’s not a surprise that there are many reasons why a free agent would or wouldn’t sign for the Montreal Canadiens. When a player signs a contract to play in Montreal, he’s well aware that once he wears the Habs jersey it’s a different beast than let say playing in Raleigh, North Carolina.

Taxes is one the main reason why a lot of free agents doesn’t not to play in Montreal. As the article points out, the players’ paycheck is cut in half because of taxes. When 50% of your money is gone, it’s definitely a motivator to play elsewhere.

I believe to attract top talent in Montreal, the Habs have to pay a premium, or something I call the “Montreal Tax”. Not only it’s more “complicated” to play on Montreal, the “Montreal Tax” would also compensate for the extra income tax the player has to fork over.

As an example, let’s assume that fictional player Zdeno Pacioretty gets two offers, one in Montreal and one in Dallas. Well a $5 million payout in Dallas is a $5 million pay cheque because Texas doesn’t have income taxes. In Montreal, a $5 million pay cheque is $2.5 million. To compensate for the “loss” income, the Habs might have to offer more money to sign Mr. Zdeno Pacioretty so he doesn’t feel penalized. This example gets more complicated when you have a salary cap and other restrictions to follow.

Actually the only time I remember sport media having a “serious” discussion about income taxes is when Ilya Kovalchuk ditched Jersey to go play in Russia. Russia doesn’t have income taxes, so his gross salary was actually lower than Jersey, but his net was much higher. There are several reasons on why I think it’s not really discussed when it comes free agent season.

First, it’s taxes. There’s nothing sexy about taxes. Bring up the word and people will switch channels or turn off the radio. A sports fan wants to talk about sports, not f*ing taxes.

Second, taxes are a complicated subject. Each province, state, country, district has their own code and rules. It’s an absolute mess that confuses everyone because the law is subject to interpretation. That’s why we have tax lawyers.

Third, taxes are outside everyone’s control. Everyone has to pay their fair share. The topic is beyond sports. It’s not like they can change the tax rate to accommodate certain players. In general, the whole tax code needs to review and adjusted to today’s reality.

Fourth, try talking about taxes without getting into a messy political fight. It’s not worth going there.

Below is a quote from the article that resumes well this post:
” In 2006, former Canadiens defenceman-turned-player agent Gilles Lupien told The National Post that Montreal was a great place to play hockey, but that its high taxes worry some players. His client Martin Lapointe for instance, had $25 million offers from Montreal and Boston in 2001 when he became a free agent. Lapointe (now the Director of Player Development for the Canadiens) opted for Boston, avoiding high taxes and the intense Montreal media.”



Data Source: TSN

Transforming Darden Restaurants

You might have noticed that the original website with the Starboard Value LP presentation is down or non-existent.

Below you can find the 294 slides super presentation below.

Starboard-Value-13D-On-Darden-Restaurants (132mb)

Below are some highlights from Starboard’s Transformation Plan:
Transformation Plan
Starboard’s Transformation Plan includes:
comprehensive, company-wide operational improvements (slides 90-158);
a turnaround plan for Olive Garden (slides 159-216);
a value enhancing strategy for Darden’s real estate assets (slides 217-229);
a separation of Darden’s restaurant concepts into the most logical groupings (slides 230-236); and
a franchising program designed to accelerate growth and improve returns on capital (slide 237-258).
Starboard has identified specific opportunities to increase annual EBITDA by $215-$326 million and believes that these quantifiable EBITDA improvements alone will create approximately $15-26 per share in value (slides 9, 91, 156).