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A Chevron gas station sign is seen in Del Mar, California, in this April 25, 2013 file photo. (Mike Blake/REUTERS)
A Chevron gas station sign is seen in Del Mar, California, in this April 25, 2013 file photo. (Mike Blake/REUTERS)

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Sept. 19: Nothing to fight over? – letters to the ROB editor Add to ...

A lot to fight over

Re Should Canadian courts hear a case when there’s nothing to fight over? (Sept. 13):

Nothing to fight over? Ecuadoreans are suing to seize Chevron assets to cover the $9.5-billion (U.S.) it owes to pay for a cleanup of the worst oil-related disaster in history. Clearly, Joanna Baron has never been to the Ecuadorean Amazon.

For three decades, Chevron’s predecessor Texaco treated the rain forest like a trash dump, intentionally pumping 18 billion gallons of toxic water into streams used for drinking and storing leftover crude in unlined oil pits that leached into soil and water.

Chevron does not even deny the deliberate dumping of this toxic waste, but it has spent billions avoiding responsibility for a cleanup. The “remediation” Ms. Baron refers to has been proven a sham by Chevron’s own evidence. Desperate to avoid paying, Chevron pulled its assets from Ecuador and cried victim. The oil giant actually sued its own victims in the United States based on the testimony of a corrupt witness who has since admitted to lying on the stand and received $2-million from Chevron to testify.

His admissions and forensic evidence disproving Chevron’s fraud claims were not considered by the appeals court in New York, but they could be here in Canada.

So yes, there’s a lot to fight over.

Paul Paz y Mino, associate director, Amazon Watch, Oakland, Calif.

GM’s big picture

Re Clouds hang over Canada’s Motor City (Sept. 3):

The entire global auto industry is moving into a period of major disruption because of the arrival of self-driving cars and driverless taxis.

Ford has announced that it will start selling cars for use as driverless taxis in 2021. General Motors, Google and many others have also announced plans to enter into the driverless taxi space.

The Organization for Economic Development and Co-operation has said in a report that self-driving taxis combined with high-capacity public transport could remove nine out of every 10 cars in a mid-sized European city. (In my opinion, that is too optimistic, but the impact will certainly be substantial.)

Ford executive chairman Bill Ford has said the auto industry will change more in the next 10 years than it has in the past 100. The big winners will be the world’s technology companies, which are hungry for a slice of the $10-trillion (U.S.) global mobility market.

All thought leaders agree that it’s not just Canada’s Motor City that will change – it will be the global auto and technology industries.

Barrie Kirk, executive director, Canadian Automated Vehicles Centre of Excellence, Kanata, Ont.

Long on hedging

Re Why are the hedgies still shorting the banks (Aug. 27):

Scott Barlow writes “The short positions on Canadian banks have almost uniformly resulted in losses … [and] considerable financial pain for the doomsayers.” It is incorrect to assume all who short Canadian banks are doomsayers. Hedging is about managing risk, not spreading doom.

How would Mr. Barlow know that shorting banks led to losses? He ignores the long side. The key to hedging is how two stocks move relative to each other. If the short position goes up but the long position rises by more, the hedge makes money. Suppose a U.S. hedge fund was long Bank of America stock at 0.6 times book value. Canadian banks trade on average at 1.7 times book value. That’s almost twice as expensive from an American perspective. Over the past five years, Bank of America, JPMorgan and Citigroup are up an average of 93 per cent while the Canadian Big Five are up an average of 16 per cent in U.S. dollar terms. Hence, this hedge has been a big winner.

Suppose a foreign fund was bullish on resource stocks in early 2016 and invested in Barrick Gold (up more than 130 per cent year-to-date) or Teck Resources (up more than 300 per cent YTD). Shorting Canadian banks would neutralize market and currency risks, as the banks are perceived as liquid proxies for the Canadian market. The Big Five banks are up about 12 per cent YTD. Once again, shorting Canadian banks makes a lot of sense on a risk-adjusted basis.

Jerome Hass, Lightwater Partners, Toronto

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