Blessed by the Potato

Not too long ago, there was a considerable political stink raised when the NRU in Chalk River went down for maintenance and was found to not have the proper emergency power supplies, etc., in place. The outage caused a significant ripple in the medical community, as the NRU provides about half of the Tc-99m used in the world, the most commonly used isotope in nuclear medicine. Indeed, it was pressure from patients and the health care community that made the government take the incredible step of over-ruling the nuclear safety watchdog.

The restart and upgrades to the NRU are really just stop-gap measures though: that reactor is a bit of a dinosaur, and due for replacement. Long in the works, the twin MAPLE reactors were supposed to be that replacement, but recently it was announced that their continued development was going to be cancelled. They had been almost completed, when it was found that their reaction characteristics were not as expected, and years of tinkering and experimenting were not able to find or fix the design flaw. For now, things will muddle on: the NRU has a license to operate until 2011 and can probably continue operating for a few years beyond that.

But the simple fact remains that Canada has no long-term plan for the supply of isotopes for nuclear medicine. And that means, essentially, that half the world doesn’t have a long-term plan for medical isotopes. One thing we can say for certain is that nuclear medicine is about to become a whole lot more expensive. All along, the costs of the NRU have not, AFAIK, been passed on to customers. Money was not being collected to fund the construction of MAPLE reactors. The Canadian government was essentially subsidizing the cost of nuclear medicine the world over. I’m all for subsidizing it in Canada, don’t get me wrong, but my understanding is that our exports of nuclear material did not fully recover the true costs (granted, including money sunk into research in the 50’s/60’s).

An alternative option for many (but not all) present nuclear medicine scans is the use of PET. PET is not currently paid for by OHIP, largely because it is seen as too expensive, even though it offers advantages for some types of imaging (e.g.: cancer). However, that cost disadvantage is partly artificial: a PET scanner requires a ~$10 Million cyclotron facility within about 2 hours of driving distance, which adds up to a fair number of cyclotrons needed across the province. However, traditional nuclear medicine requires a billion dollar+ reactor, which just happens to be subsidized by the Canadian government.

It’s hard to say at this point what the future will hold for nuclear medicine. Maybe it will get more expensive, as a private group (or another country, like the US) builds a reactor to replace the NRU, and tries to run it at a profit. Maybe it will change quite rapidly over to PET imaging if the end of the NRU is seen with no replacement in sight. Or perhaps nuclear medicine will go away, except for a small number of truly needy cases who might warrant bringing isotopes across the Atlantic.

Well, I mentioned that a distribution cut was priced into QSR.UN, and now that their Q2 results have been released that’s indeed what has happened. The cut was towards the steeper end of what I figured, down to $0.60/year going forward (5 cents per month), and 90 cents for 2008 (including the 63 cents already paid for the year) even that is still at about a 90% payout ratio, so the cashflow looks to be managed. The stock jumped ~5% on the news, but closed up just 2% after a fall in the last minute or two of trading. At $3.50, that’s still a yield of 17%, and I think it will probably move up over the next few days on the news, and my new price target is $4 (going to a yield of 15%). I’m somewhat tempted to buy more, especially if it stays down at $3.50 tomorrow. It would be over-concentrating in a mediocre company to an uncomfortable degree, but I think it could possibly jump 10% or more in a few days as the news percolates out — and if not, I can live with a 17% yield; the question being of course, how sustainable that will be going into the future.

There are some big questions raised here. The world does not look to be ending for Priszm, and the fundamentals, from what I see, indicate that it is a value at this price. However, there is an issue of trust and faith in the management raised now. Just a few months ago they were fairly bullish in raising their distributions back up to $1.20/year — to a level that was immediately recognized by the analysts as being unsustainable. Then they cut it down, to about a 50% payout, far beyond what the analysts were calling for and what the cash flow would dictate, surprising investors. They over-promised, and under-delivered.

We’ll see what the analysts have to say in the morning.

I just got back from seeing Hellboy II, and we had a terrible time. Granted, part of that was not the movie’s fault: my pop was warm and flat, with no ice. Granted, I occasionally order it with no ice so it’s sweeter and doesn’t hurt my teeth, but then it’s usually at least starting cold or at least cool. This was like body temperature. Ick. The popcorn also wasn’t very good, and the theatre’s A/C didn’t quite seem up to the task of a Batman opening weekend — oh, and of course, we had actually gone to see Batman, but even 2 hours before the show they were sold out. D’oh.

So starting off in a foul mood, Hellboy II didn’t really serve as the fun-filled action pick-me-up we were hoping for. It just dragged. And I like good pacing and long movies. Normally, I’d try to do a full review, try to find the good bits, what could be built upon for a director’s cut, but Wayfare came out of it saying “that was the second worst movie I’ve ever seen” so I don’t really feel the need to even try for this one. There were parts, a number of parts, where I was bored. The effects were good, the acting was good, the cinematography was ok, the dialog was not terrible — but it just never came together. It wasn’t trainwreck bad, it was just… empty.

Don’t bother with it — if Batman’s sold out, try Wall-E or go home.

Edit: Ok, I’ve been talking with a few people who did like Hellboy II, so here’s a bit more about what I didn’t like. First up, it was visually stunning, I’ve got to give it that. The creature design was something else. But nothing that happened really ever seemed to matter. Right at the beginning, there was the bit about “what happens if someone does challenge the crown?” and we knew as soon as we saw Nuala, that that’s what would happen (it was a surprise that Hellboy himself ended up being of royal blood and challenging, but that was a strange, minor twist that just added a fight sequence, and didn’t really break the spell of predetermination for me). Once we figured out that she and her brother shared some crazy link, her suicide also became pretty obvious. But in a more general way, in almost every scene, nothing seemed to really matter. The guys in the suits got eaten alive right at the beginning, and Hellboy and crew just didn’t seem to care. At all. They found a troll market full of all kinds of weird creatures, and it was just like “whatever”. Perhaps they needed someone in the role of “outsider” to help the audience relate to the strangeness on screen, another John Myers. The outsider is often little more than a gimmick, but unfortunately they just weren’t able to get any kind of gravity into their situations as it was. Even when fighting the tree-god whilst holding the baby, Hellboy was all like “hey, relax, I do this every day” — there was no sense of peril, no weight to the action. The most human, meaningful scene seemed to be the drunken karaoke one, the one where the characters seemed to be most life-like and actually cared about what was happening. It was at that point where I sort of said “ok, this is some bullshit right here, that this cheesy scene that should be the best one yet, when it should be the first one up for the cutting-room floor if the running time needed to be shortened.” Not that it matters in an action movie, but there was also zero chemistry between big Red and Liz. She spent almost the whole movie being angry and sullen with him, not exactly endearing.

Well, Dr. Horrible Part 3 has been posted. It’s only 15 minutes, go watch it if you haven’t yet, then come on back.

Spoiler warning!

So, Dr. Horrible Part 1 and 2 were I think the best thing ever to come out of Joss Whedon’s brain. Better, for that brief 25 minutes, than even Firefly. I’ve watched each one about 20 times, and everything is just perfect: NPH’s facial ticks, that empty look in his face when he is first asked about Penny, the picture taken through the bushes, it’s just amazing. The songs are catchy and clever, and I was humming or singing them in my head for days afterwards. And there’s a great balance between the musical comedy aspects and the regular acting parts — which were incredibly well done. In just a few minutes of screen time there seems to be real depth to the characterization of Moist, Dr. Horrible, and Penny. Plus it was so incredibly true-to-life (slightly exaggerated of course, but it’s one of the best portrayals of a hopelessly romantic mad scientist I’ve ever seen).

The third and final part I felt was kind of a let-down today. It started off pretty strong, with Captain Hammer being such an arrogant tool that he drove Penny off, which is how I saw this part progressing in my mind. I really liked the very brief part with Penny in the laundromat with two frozen yogurts (what a crazy random happenstance!). But then they put a twist on it and went in another direction completely. Twists and going in a different direction is ok, just to get that out there, but they turned it from a musical comedy into a musical tragedy, which really didn’t seem to fit the theme and feel of the first two parts (ok, not fitting the theme of the first two parts makes the twist more effective when it comes, but it doesn’t bring to a satisfactory ending the story that I’ve practically memorized in the first two parts). Plus the third part seemed to have a lot more singing and a lot less cutsey, clever acting parts in-between. Again, not necessarily a bad thing in general, but I didn’t find the songs as good or as catchy. I might still be singing “with my freeze-ray I will stop…” or “evil on the rise” or “it’s a brand new day” in the shower for the next few weeks, but I don’t think “So they say”, “Everyone’s a hero”, “You’re slipping”, or “Dr. Horrible is here” will get much play, so to say.

I’d prefer a different ending, but nonetheless, it’s the best super-villain musical comedy out there, so I’m going to buy it on DVD once that becomes an option.

Wayfare sent me an interesting, thought-provoking article in the Toronto star “Sizzlers and Fizzlers”. I shouldn’t say article, it really doesn’t have much writing to it, no analysis or commentary. It’s an interesting factoid. The PDF with what juicy information there is is here. The headline number is that in the last 40 years, Toronto real estate was up 1250% (since 1969), compared to the TSX being up 1244%. This implies that real estate was just as good if not a better investment over the long term than the stock market (once you factor in carrying costs, stocks look like the better place to keep your money, but then you can really leverage the hell out of real estate).

That really put the tingles to my scientist senses* (like Spidey senses, but for nerds… though Peter Parker was a bit of dweeb himself), since this does not jive with just about everything else I’ve read. It makes me want to look deeper into the methods to see how these conclusions came about; it sets off my Saganist “extrodinary claims require extraordinary proof” alarm.

* – Humorous aside, we were talking today in the lab about curious results, including one study that exposed subjects to a 13-hour and 18-hour exposure period every day. Explaining where they found their 31-hour days would have made for a much more interesting paper.

Just about everything else I’ve read, which is more general and not specific to Toronto, puts the compound inflation-adjusted rate of return for housing at about 1% or so (so the nominal rate should be 3-5%). So to see the 6.9% figure in this article (the same as stocks) was a little baffling. Is Toronto really that special? Was all that other stuff about long term trends I read wrong?

Unfortunately, the article does not give anywhere near enough information to say for sure. There are some inconsistencies though. First off, their numbers for the stock market look to be about right, in terms of the nominal prices over the years, but don’t look to include the return from dividends, which should improve the stock market figures by a fair margin. I also have to wonder if the choice of starting year in 1969 could affect things, since the 70’s were a rough decade for stocks — would the picture look different starting from 1959 or 1979? (I don’t actually know, but it makes me wonder) Some areas (and Toronto’s overall average) have not, in inflation-adjusted terms, come back to their 1989 peaks yet, and my dad was saying not too long ago that the housing boom had just recently brought their house back up to that point. Naturally, some areas have been hotter than others. Surprisingly, Willowdale (C-14) was one of the very coldest areas in the study, which just doesn’t agree with the fact that it’s such a desirable neighbourhood. Was it just simply already a wealthy, desirable neighbourhood in 1968, so when the data started in 1969 there wasn’t a whole lot of up left to go? I doubt that, since it used to be, from the perspective of a kid growing up there, a “normal middle class” neighbourhood, and is now full of, well, rich people and condos. The average home price there according to the PDF, $390,520, is almost exactly the same as the overall Toronto average at $390,839 (but it was a good deal above average at the 1989 peak, hence the underperformance). However, a quick trip to MLS will show that the lowest non-condominum asking price is $420k, so how the average got to be $390k in a neighbourhood full of million dollar homes is completely beyond me. The lowest price for a condo is in the $160k range, so it’s possible that all the new condo development in the area is really bringing down the average. But what does that mean for the overall study then? North York’s condo buildup started just a little bit ahead of a lot of other areas, so is the fact that what must be a large number of these units are now being flipped and bringing the average of “resale” homes down disproportionately hurting that area? Likewise, are the people who recently sold their SFHs in the “gentrifying” areas like Leslieville to developers for gagillions of dollars bringing the average way, way up because the condos built on those sites haven’t had a chance to be flipped yet? Since they’re using average values and not medians, are a few $25 million dollar homes in a few areas really skewing the results? Do these results in any way have bearing on the reality of owning a home in Toronto over the past 40 years? Do they offer any insight for what might be in store in the future?? Disturbingly, some of these questions suggest that, for example Willowdale, might have performed even better than the factoid’s already generous rate of return. Or, that the really great returns will come from places that are presently farmland, and not areas that currently look good. Or, that it was a really good idea to own real estate in the 70’s and 80’s, and a really bad one in the 90’s, with the 00’s being a bit of a wash, so far.

The study seems to have enough holes that I’m not going to reject my earlier information that suggests that housing, in general, underperforms the stock market. It is possible that Toronto was a special exception in the last 40 years compared to the overall averages of US (and more rarely for data discussion, Canadian) real estate. After all, in the last 40 years Toronto went from being a backwater city up in, you know, Canada, to being a world-class metropolitan city. Toronto had a huge boom in building and real estate in the 70’s: that’s when almost all of the recognizable downtown was built up: First Canada Place, Royal Bank Plaza, the CN Tower, etc. Two-thirds of those impressive 40-year real estate returns were due to gains in the 70’s and 80’s (yes, it’s cherry-picking at a market peak, but in the second 20 years of this study, housing only returned 2% nominal straight-line returns per year, with negative growth when adjusting for inflation). In just the last 10 years the suburbs have expanded so much some people have started calling them the exurbs, another period of massive growth for Toronto, and also what turned out to be another real estate bubble in the States. So while the headline 40-year overall nominal return number is attention-grabbing, especially next to the very similar number for the nominal TSX return, I’m not convinced that a house is the best place to put my money.