Join the new world

First an update on the Housing industry.

Late last week we were reporting that the housing industry showed great solvency. Although some numbers changed, it remains true. Entry level skill jobs (0-1) has seen a nice progression which suggests new entries into the construction business. Unfortunately the salaries offered for skills 3, 4 and 5 were slashed (43% lower in the case of skill 3).

The optimum configuration under these economic realities is skill 3 workers for Q1 and 2 housing companies. Skill 6 workers for all the rest.

The housing industry is very efficient (less than 1% difference) with Canadian wood prices being near the international minimum (Spain). That means no need for importing wood and also no need to convert money.

Q1 housing companies can expect profits over 1 gold daily if they sell on the market. The margin for Q5 companies is 9.5 gold on the market.



Weapons Industry.

The next industry to be analyzed was weapons manufacturing. War is a constant reality, the more the better. To be efficient in battle, we need to be armed properly. The potential market in Canada is active citizen*5... each day there is a battle.

One reason why weapons would be so interesting to look at is the fact that it is the only sector not served by a domestic supply of raw material. For everything else we can sustain ourselves with competitive local offers but in the case of iron we are at the mercy of foreign interests.

Iron.

The market supply of iron in Canada is actually not that bad. Our prices are within 5% of the lowest international prices. That means that although there are savings to be found by importing iron, it should not cripple owner’s ability to generate profits.

The struggle.

Gun prices are a common concern. We all want lower prices since it is a good we consume in great quantity. When we compare to what can be purchased in foreign countries we get especially insistent that prices should fall. The difference between Canadian prices and Finland (lowest Q1 at the time this snapshot was taken) is the equivalent of $0.36 per weapon or $1.82 per day of fighting. Not a huge amount but one that accumulates over time. This is especially true for groups (government, private groups) that purchase in bulk.

So if the prices of Canadian goods are so high, where are all the profits going and how big are those profits?

In the case of lower Q guns the answer is... there are no profits. The optimal Canadian worker in manufacturing is skill 3 being paid $5.34 (or $0.42 per productivity point). Prices for guns (as of this morning) hover at $2.58. A Q1 owner would be showing losses of 0.42 gold/day. Even if he saved the 5% iron price difference his losses would still be 0.39 gold a day.

A Q2 company owner would similarly still find the market tough showing losses of 0.09 gold/day.



For both of these business owners there are no further savings except for cutting wages. International markets are not available to them as in many cases Canada's products are costlier. That is the downside of a high currency value. When markets are too competitive there are no plans B.

The picture starts changing at the Q3 level where owners here still are best to hire lower skill workers and produce fewer weapons a day but maximize their bottom line. At present market prices they can expect returns of about $22 a day (or 0.71 gold).

Quality is gold and that is true with Q4 and Q5 weapons. Here owners need to upgrade their workforce, preferably going for skill 6 with average wages in the $12.75 range. Once that is done profits jump to $60 and $90+ a day for each quality upgrade.

We will be looking at diamonds and gifts in the next few days as they are expected to undergo the greatest changes come V2. When we talk about the changing face of business, we will be looking here first.