Mr. Wilson’s point 4 is incorrect. Inflation is embedded in the time value of money framework, and the time value of money is already reflected in the discount rate used to calculate the 33.8 billion present value estimate (as of Dec 31, 2024). I know you have not yet published his Appendix C, but I have reviewed it and he is clearly double discounting which is why his figure is so low. His inflation estimate of 3.86% is way too high and he does not seem to realize that inflation is already reflected in the project’s discount rate and in the 3.60% 10-year Canada bond yield he quotes. In short, the 33.8 billion figure, though an estimate, already incorporates both expected inflation and time value of money.
If you Google “Does a project's discount rate consider time value of money”, its AI overview will replay something similar to: “Yes, a project's discount rate explicitly considers the time value of money, as its core function is to calculate the present value of future cash flows.”
If you Google “does time value of money consider inflation” it will replay something like “Yes, inflation is a key factor considered within the time value of money (TVM) framework”.
There is nothing magic about Google here, it is giving textbook type answers. Mr. Wilson is getting this entirely wrong with his double discounting. If he gets something this basic so very wrong, I cannot put any faith in his other opinions.
I am not relying on AI, I understand this stuff inside out. I am referencing Google because everyone has access to it unlike Finance textbooks, but this is Finance 1000 stuff that Mr. Wilson is getting wrong. Use Google, ChatGPT, Finance texts, Wikipedia, etc. he does not understand that discount rates already reflect time value of money. He is clearly double discounting. His inflation estimate of 3.83% is outside of the range of Bank of Canada target 1-3% target of which they have been close to the mid-point since inflation targeting was introduced in 1991. I understand that not everyont trusts AI, so please feel free to go the Bank of Canada's website and indicate 100 as a 1991 price and you will see it shows realized inflation since then at about 2.03%. Mr. Wilson's 3.83% figure is not reasonable and not matter what his forecast for infaltion he should not double discount. https://www.bankofcanada.ca/rates/related/inflation-calculator/
Luke, you make the accusation that an experienced professional - someone who understands this stuff, on the face of it not just better than you but inside out and upside down and back around again - has made what amounts to a rookie mistake.
All you've actually done is say you disagree with the way he's calculated inflation.
I'll leave Mike to defend himself, if he feels the need but let me say that if you want to make a substantive argument that rebuts him, please do. So far, you haven't come close to the minimum standard.
Part of the problem, evident in your first comment, is your reliance on AI. You indicate the questions used, which are generic, about what happens on a project to what happened on *this* project. *That* is the problem with your use of AI: it's a crutch to justify your argument not a tool to make an argument of your own. AI simply doesn't know enough of this project.
Let me give you an example of the problem with AI. Two people (one of them me) separately used AI to double check our own reading of the Elections Act, 1991 on Alison Coffin's twin-district candidacy. AI got it wrong in one case and not right in the other. It lacked enough detailed information to make a judgment. It happens.
Now, in other cases, AI can very very useful as a big calculator but it very much depends on the questions the user asks and the user's understanding of details of the specific issue. I've used Ai results generated by someone else a number of times and I'll be using the same sort of information over the next week or two. There's a use for AI but you'll need to do more work of your own to show the rest of us why Mike is wrong and how you got there.
One problem may be the idea that the 33.8 billion is an estimate or an approximation when - according to the MOU is the firm number.
Anyway, you produce a critique, including tables and we can run it here, with your name on it the same way I've run Mike's stuff.
I will start by saying the Ed Hollett's facial features, from photos and on TV sometimes, reminds me of the USA genius Ben Franklin. I think his face in on one of the America money bills, maybe the 1 dollar note. Franklin did the initial research in lightning, was world famous for this and invented the lighting rod to protect buildings, and more famous than Elon Musk today, when he went to France to persuade them to join the Revolutionary War against Britain.
On understanding the value of money, the other Americans politicians, then considered traitors by Britain, were all worried by all the money they were borrowing from France to fund Washington''s Army and the war in general. Franklin told them not to worry about that, explaining that "we'll pay it back in inflated dollars".
This inflation estimation in this MOU and today's value of this huge pile of money, supposed coming our way, is a very significant factor in this scam being put to the NL people. This is to to be expected from Quebec, they are very clever on these matters, but shameless promoted by the Liberal Government, Furey (who then skeedaggled away) and Nlfd Hydro, and Jennifer Williams ( whether she understands that issue like Franklin and Wilson and Hollett does.
Certainly the general public has no idea of the cleverness of this scam, when lumped with several projects into one, being a masterful art of deception.
I, an electrical engineer who worked with Nfld Hydro in high voltage power systems, had but one course in economics, far from an expert like Wilson or Dave Vardy, and some others. But like many who lived through the 1980s, when inflation hit about 20 %, we know the impacts on mortgage costs, and loss of value to the common worker on fixed wages, based on high inflation rates, and an average value over 50 years or more.
Indeed, how to bring this complex analysis to a level that the average person can understand, is not easy, to identify the truth of this. In my opinion, it is a world class con job. I feel confident is is world class, by the genius of the HQ negotiators, and our NL, (Newfie) spineless, self serving, soulless con artists.Just another SAD SAD SITUATION, as to our future, if this is not terminated.
This latest on the MOU isn’t helpful. I understand we are getting fucked but the ins and outs are unfathomable and very confusing. None of this is helped by the fact the MOU has more than one deal for more than three projects over a century.
I am of average intelligence and, while becoming elderly, I am not suffering cognitive distortion. Your’s and Wilson’s words are full of terminologies and critiques about money, cost, price, valuation, inflation, and so on, all mystical and, perhaps, to me, at least, arcane.
Someone needs to provide a glossary and detailed application of the terms used to the MOU, in plain English.
Pull the Plug was a catchword of previous years, meaning shut it down and start with a clean slate. Too late, I know, but is an understandable plan A.
it’s very much a technical discussion down in the weeds, not for everyone. But this piece and the others that you’ll see over the next couple of days our part of the record and will be important for some people now and in the future.
If you go back to my archive from the original blog, you will find literally thousands of pieces about the project that eventually became called. Muskrat Falls. Some of it was deeply technical or complicated. Other stuff was lighter and easier for a wider audience to understand.
Not everything is for everyone. If you look at what I’m gonna run tomorrow morning, you’ll see it deals with many of the same issues and touches on many of the questions that people have. But it’s in plain language.
Mr. Wilson’s point 4 is incorrect. Inflation is embedded in the time value of money framework, and the time value of money is already reflected in the discount rate used to calculate the 33.8 billion present value estimate (as of Dec 31, 2024). I know you have not yet published his Appendix C, but I have reviewed it and he is clearly double discounting which is why his figure is so low. His inflation estimate of 3.86% is way too high and he does not seem to realize that inflation is already reflected in the project’s discount rate and in the 3.60% 10-year Canada bond yield he quotes. In short, the 33.8 billion figure, though an estimate, already incorporates both expected inflation and time value of money.
If you Google “Does a project's discount rate consider time value of money”, its AI overview will replay something similar to: “Yes, a project's discount rate explicitly considers the time value of money, as its core function is to calculate the present value of future cash flows.”
If you Google “does time value of money consider inflation” it will replay something like “Yes, inflation is a key factor considered within the time value of money (TVM) framework”.
There is nothing magic about Google here, it is giving textbook type answers. Mr. Wilson is getting this entirely wrong with his double discounting. If he gets something this basic so very wrong, I cannot put any faith in his other opinions.
Luke O'Brien, CFA Charterholder
If are using AI that automatically skews everything you are doing. It’s not a reliable tool.
I am not relying on AI, I understand this stuff inside out. I am referencing Google because everyone has access to it unlike Finance textbooks, but this is Finance 1000 stuff that Mr. Wilson is getting wrong. Use Google, ChatGPT, Finance texts, Wikipedia, etc. he does not understand that discount rates already reflect time value of money. He is clearly double discounting. His inflation estimate of 3.83% is outside of the range of Bank of Canada target 1-3% target of which they have been close to the mid-point since inflation targeting was introduced in 1991. I understand that not everyont trusts AI, so please feel free to go the Bank of Canada's website and indicate 100 as a 1991 price and you will see it shows realized inflation since then at about 2.03%. Mr. Wilson's 3.83% figure is not reasonable and not matter what his forecast for infaltion he should not double discount. https://www.bankofcanada.ca/rates/related/inflation-calculator/
Luke, you make the accusation that an experienced professional - someone who understands this stuff, on the face of it not just better than you but inside out and upside down and back around again - has made what amounts to a rookie mistake.
All you've actually done is say you disagree with the way he's calculated inflation.
I'll leave Mike to defend himself, if he feels the need but let me say that if you want to make a substantive argument that rebuts him, please do. So far, you haven't come close to the minimum standard.
Part of the problem, evident in your first comment, is your reliance on AI. You indicate the questions used, which are generic, about what happens on a project to what happened on *this* project. *That* is the problem with your use of AI: it's a crutch to justify your argument not a tool to make an argument of your own. AI simply doesn't know enough of this project.
Let me give you an example of the problem with AI. Two people (one of them me) separately used AI to double check our own reading of the Elections Act, 1991 on Alison Coffin's twin-district candidacy. AI got it wrong in one case and not right in the other. It lacked enough detailed information to make a judgment. It happens.
Now, in other cases, AI can very very useful as a big calculator but it very much depends on the questions the user asks and the user's understanding of details of the specific issue. I've used Ai results generated by someone else a number of times and I'll be using the same sort of information over the next week or two. There's a use for AI but you'll need to do more work of your own to show the rest of us why Mike is wrong and how you got there.
One problem may be the idea that the 33.8 billion is an estimate or an approximation when - according to the MOU is the firm number.
Anyway, you produce a critique, including tables and we can run it here, with your name on it the same way I've run Mike's stuff.
I will start by saying the Ed Hollett's facial features, from photos and on TV sometimes, reminds me of the USA genius Ben Franklin. I think his face in on one of the America money bills, maybe the 1 dollar note. Franklin did the initial research in lightning, was world famous for this and invented the lighting rod to protect buildings, and more famous than Elon Musk today, when he went to France to persuade them to join the Revolutionary War against Britain.
On understanding the value of money, the other Americans politicians, then considered traitors by Britain, were all worried by all the money they were borrowing from France to fund Washington''s Army and the war in general. Franklin told them not to worry about that, explaining that "we'll pay it back in inflated dollars".
This inflation estimation in this MOU and today's value of this huge pile of money, supposed coming our way, is a very significant factor in this scam being put to the NL people. This is to to be expected from Quebec, they are very clever on these matters, but shameless promoted by the Liberal Government, Furey (who then skeedaggled away) and Nlfd Hydro, and Jennifer Williams ( whether she understands that issue like Franklin and Wilson and Hollett does.
Certainly the general public has no idea of the cleverness of this scam, when lumped with several projects into one, being a masterful art of deception.
I, an electrical engineer who worked with Nfld Hydro in high voltage power systems, had but one course in economics, far from an expert like Wilson or Dave Vardy, and some others. But like many who lived through the 1980s, when inflation hit about 20 %, we know the impacts on mortgage costs, and loss of value to the common worker on fixed wages, based on high inflation rates, and an average value over 50 years or more.
Indeed, how to bring this complex analysis to a level that the average person can understand, is not easy, to identify the truth of this. In my opinion, it is a world class con job. I feel confident is is world class, by the genius of the HQ negotiators, and our NL, (Newfie) spineless, self serving, soulless con artists.Just another SAD SAD SITUATION, as to our future, if this is not terminated.
Dear Ed
This latest on the MOU isn’t helpful. I understand we are getting fucked but the ins and outs are unfathomable and very confusing. None of this is helped by the fact the MOU has more than one deal for more than three projects over a century.
I am of average intelligence and, while becoming elderly, I am not suffering cognitive distortion. Your’s and Wilson’s words are full of terminologies and critiques about money, cost, price, valuation, inflation, and so on, all mystical and, perhaps, to me, at least, arcane.
Someone needs to provide a glossary and detailed application of the terms used to the MOU, in plain English.
Pull the Plug was a catchword of previous years, meaning shut it down and start with a clean slate. Too late, I know, but is an understandable plan A.
it’s very much a technical discussion down in the weeds, not for everyone. But this piece and the others that you’ll see over the next couple of days our part of the record and will be important for some people now and in the future.
If you go back to my archive from the original blog, you will find literally thousands of pieces about the project that eventually became called. Muskrat Falls. Some of it was deeply technical or complicated. Other stuff was lighter and easier for a wider audience to understand.
Not everything is for everyone. If you look at what I’m gonna run tomorrow morning, you’ll see it deals with many of the same issues and touches on many of the questions that people have. But it’s in plain language.