King: Canada’s Cape Canaveral North

Canada has had enough of the US’s excuses for delaying or canceling launches. It wants its own space home and launchpad now. May 29, 2024 [WEBSITE]( | [UNSUBSCRIBE]( King: Canada’s Cape Canaveral North BYRON KING Recently, the government of Canada made a major decision: it wants a space launch site in-country and will spend serious funds to get one. In fact, the government of Canada just announced a multimillion-dollar deal to backstop construction of a new spaceport, essentially Canada’s version of Cape Canaveral. There are many angles to this; whether you are an investor or not, you might want to know more. So read on… Canadian astronaut Chris Hadfield. Courtesy NASA. Access to Space In 2024, putting satellites into space is a half-trillion-dollar global business. It’s big money and getting bigger. Take all the world’s space programs, military and civilian: U.S., Russia, China, Europe, India, Israel, Japan, South and North Korea, and numerous others, including private companies like United Launch Alliance (Boeing-Lockheed), SpaceX, Blue Origin and, again, many more. Add up the spending, and it’s in the $500 billion range: a big number growing fast and heading towards a trillion-dollar-plus by 2035. It's no stretch to say that every advanced industrial country has a space program or wants one. Access to space is crucial to being a respected world power. Along these lines, Canada has significant aerospace history and impressive capabilities. These range from superb universities and world-class rocket scientists to a wide variety of companies that provide space-rated metals and materials, rocket and satellite design, electronics, software, and much else. At the government level, much of Canada’s space effort is coordinated by the Canadian Space Agency (CSA), Canada’s equivalent of NASA. Canada can build both rockets and payloads. It has astronauts who have flown in space; the above-pictured Chris Hadfield comes to mind, along with numerous other spacefarers. Over the past 75 years, Canada has contributed to innumerable space missions that launched into earth orbit, efforts in planetary geology on earth and elsewhere in the solar system, and, of course, astronomy. “Canadarm” robotic maneuvering device, used on over 90 space shuttle missions. Courtesy NASA. [Urgent Publisher Warning]( Hi, I’m Matt Insley. I’m the Publisher at Paradigm Press. Today, I have [bad news to share]( regarding the future of Jim Rickards’ newsletter. [>> Click here now for my announcement.]( [Click Here To Learn More]( Canada’s Missing Launch Site However, something is distinctly missing from Canada’s space achievements and future goals: a launch site. Canada has no venue from which to launch rockets into space. But that’s about to change. It may seem odd that Canada can’t launch its own rockets. After all, Canada is a big place—the second largest country in the world by area after Russia—and much of that is sparsely populated territory. Canada also borders three oceans. What gives? There ought to be a way for Canada to launch rockets into space, right? There ought to be a way to deliver and deploy satellites from Canadian territory, right? So why is there no launch site in Canada? First, let’s do something that’s always useful and look at a map. Canada is a big place. But there are not a lot of potential launch sites. With a glance, Canada’s rocket problem is evident. That is, launches obviously involve firing rockets up into the sky and “downrange,” meaning that the rocket and payload fly aloft at some inclination to the earth’s equator to achieve orbit. Without getting too deep into details, the exact orbit depends on what the satellite is intended to do and what areas it serves. In other words, if you fire a rocket from most parts of Canada, either Canadian or U.S. land lies beneath the trajectory. That kind of event involves risk to people, human structures, or natural features on the ground along the track. For example, what happens when a booster separates and falls or if something worse happens (if you know what I mean)? If you’re in the rocket business, you don’t want to launch and drop anything on someone’s head, wreck property, cause fires, etc. So, despite its vast land area, most of Canada is unsuitable for rocket launches into space. And, oh, by the way, sounding rockets for, say, weather or upper atmospheric research are another story. Canada has those, but they don’t go into orbit, and we’re not addressing that matter here. Let’s be clear. If someone in Canada fires a rocket from just about anywhere in the country towards the south, debris could fall on Canadians or people in the U.S. If the rocket launches to the north, debris might fall on Russia, on the other side of the North Pole. That’s unacceptable, too, of course. From the standpoint of basic geography, what’s the best place in Canada to site a rocket launch facility? Look at that map again. The best place to launch from Canada is near the southeast coast, along the Atlantic Ocean, from the Maritime Provinces. In particular, the area with the most existing infrastructure, such as roads, rail, access to ports, power lines, industry, and people in Nova Scotia. So, how about a site not far from the maritime city of Halifax? Notional launch tracks out of Nova Scotia, with a much empty ocean beneath. Launched from Nova Scotia, a rocket will track across little else but the ocean to the east and southeast and deep saltwater directly to the south. The open, blue-water ocean south and southeast of the Maritimes. Courtesy NOAA. North America’s Launch Sites Let’s consider a few basics for rocket launches from North America (note: other big space players like Russia and China have their own different geographic circumstances). First, the proximity to the Atlantic Ocean is exactly why the U.S. long ago constructed two of its key launch sites along the East Coast, at Cape Canaveral, Florida, and Wallops Island, Virginia. Both are NASA sites with significant military associations, and both locales are heavily booked for launches. The launch process from Canaveral or Wallops is well-developed. Rockets fly up, and expended items drop into the sea. Since we’re talking about rocket science, this simplifies the overall process, which includes near-endless checklists for safety and effective operations. Meanwhile, another critical U.S. rocket base is at Vandenburg, California, northwest of Santa Barbara. All launches from that site head south or southwest over the vast Pacific Ocean, and they are essentially all dedicated to military missions such as putting spy satellites into polar orbits or testing intercontinental missiles. This immediately leads to another issue for the fast-growing space launch industry. Namely, government launch sites are tightly tied up with military and other government tasks. In this sense, they’re booked by large government contractors for space missions via companies like United Launch Alliance (Boeing-Lockheed) and SpaceX. Good luck if you’re a small operator or a corporate or university research customer with an experiment to launch. Take a number and wait. Meanwhile, the U.S. military has recently surged into a massive test program for hypersonic weapons, an understandable reaction to what we’ve seen with Russia in Ukraine. This effort has tied up many military and other government facilities and ranges with new, ongoing, likely long-term commitments. Plus, these kinds of weapon tests require highly restrictive security protocols. On the civilian side, SpaceX works at a feverish pace to launch its high volume of satellites from existing facilities. Mr. Musk’s company lights off as many as two rocket flights per week from Cape Canaveral. All in all, it’s tough for anyone else to find an open slot. In addition, the complication is that rocket launch sites tend to be associated with military airspace and test ranges, which, on the best days, are tightly controlled in terms of access and use. Just obtaining clearances to move people into position, plus equipment, and sharing all manner of range tracking, safety, and communication systems creates hurdles. The good news for Canada is that the country enjoys a long-term, close working relationship with the U.S. for military and civilian space cooperation. There’s a vast network of Canada-U.S. channels for joint efforts. [Full disclosure: long ago, when I was in the U.S. Navy, I worked routinely and closely with Canada’s Department of National Defense, and many of our mutual issues involved aerospace and space cooperation.] Still, it’s fair to say that over many decades, Canada has played second fiddle regarding access to space via U.S. sites. American needs always came first; Canadian military and civilian organizations had to request launch and range access from the U.S. government for anything they wanted to put into orbit. Well (and it’s a long story, not here), Canada has determined to create its own launch capability to gain additional options for both military and civilian access to space. Canada’s New Launch Site: the Maritimes Enter onto the stage a small company with strong upside, Maritime Launch Services, Inc. (OTC: MAXQF), headquartered in Halifax. Right now, the market cap is small, about $30 million (U.S.); the OTC share price is in the $0.07 range, and shares are thinly traded. Ownership is concentrated in the hands of management, a couple of high-risk, early-stage investment funds, and a small group of bold retail buyers. In this sense, Maritime Launch is, by definition, one of those proverbial Canadian “penny stocks.” And no, we are not formally recommending this company as an investment for subscribers. But it’s worth discussing and keeping an eye on because, for all the risk, Maritime Launch is uniquely positioned to capitalize on the new Canadian effort to establish its own national gateway to space. One item that helps seal the deal is the company’s recent agreement with both Nova Scotia province and federal Canada governments, out of Ottawa, to extend generous terms to reimburse the costs for various launch facilities. In other words, government agencies are putting real cash on the table to pay for concrete and steel, so to speak, to make things happen. Another point to explain is the Maritime Launch business case, which is what’s called an “airport model” to generate revenue. That is, government agencies or private customers will make short-, medium-, or long-term leases on facilities at the site, such as land and buildings in which to conduct final assembly and checkout of systems. Clients and customers will also pay for using the launch pads, range equipment, and services like airspace clearance, fuel handling, communications, tracking, safety support, and more. Maritime Launch is discussing with many potential customers, but details must be publicly available. We know that one test launch is scheduled this summer to prove the capability to loft a rocket and support all the ground and range systems. This is a necessary milestone to attracting more customers, and on that point, we’ll wait and see. In general, launching rockets is all about location-location-location. The Maritime Launch location is a lonely stretch of uninhabited, former public lands in Nova Scotia at Canso, now leased long-term. The bedrock geology is post-glacial granite, with a thin surface cover of soil and scrub vegetation and minimal water table. In other words, the locale offers no significant environmental or development challenges, unlike, say, Cape Canaveral where most of the acreage is protected wetlands. (Yes, NASA must work with the EPA and U.S. Fish and Wildlife Service to do as much as roll a backhoe off of any established road.) As for local residents, a recent survey revealed that about 88% of the public support in Nova Scotia was for building the Canso site into a spaceport for Canada. As you can imagine, politicians love it. The Canso site is just off the Trans-Canada highway, with ample power adjacent via high-capacity electric lines. The front gate is less than two miles from a railhead, and the site is under a mile from ocean access. To move people and equipment there, the region boasts an international airport at Halifax. The runway measures 10,500 feet long, which is more than enough to accommodate the largest and heaviest cargo aircraft. In the sky above, Halifax and the Nova Scotia coastline are about 50 miles south of all major transatlantic airline routes. Hence, launching rockets won’t disrupt any heavily trafficked North America-Europe air corridors. And airspace to the south, out over the Atlantic, tends not to be too busy most of the time, facilitating restricting flights during launch windows. The Halifax region is served by the Port of Halifax, one of Canada’s major container ports. The loading-unloading facilities are just down the waterfront from a major Canadian naval base and a major shipyard, Irving Shipbuilding. Irving Shipbuilding is a sophisticated company that has designed and constructed over 80% of the vessels in Canada’s navy. Thus, when it comes to launching rockets, Canso has easy access to road, rail, air, ship, and container cargo. Transporting rockets and payloads to the site is no major logistical challenge. Plus, the Halifax region has ample facilities to provide and store common rocket fuels, including high-purity kerosene, liquid oxygen, and various other flight-related substances. Of course, launching rockets requires skilled workers. Halifax is a city of nearly half a million, with another 350,000 people in the Nova Scotia region. The province has a full range of schools, up to the level of research universities, of which Dalhousie stands out. It also hosts a significant presence in Canadian defense and civilian scientific establishments. In other words, Halifax offers ample potential for the necessary industrial, engineering, and scientific skills to build and maintain a spaceport. Plus, as time passes, outside companies that establish a presence for long-term work to launch rockets and payloads will bring in their workers from other locales. One last point to consider is the legality of shipping high-tech rocket and satellite equipment outside the U.S., a matter covered by numerous laws and regulations. The good news is that the governments of the U.S. and Canada have reached a tech-transfer agreement that will permit U.S. companies to move space equipment and related tech across the border. There’s plenty more to say, but that’s all for now. To sum up, Maritime Launch is a small company with grand ambitions, a unique location and business case, and strong government support to accomplish its goals. (Please note: We are not recommending this company in our portfolio but believe it to be a future investment idea worth considering.) I’ll continue to follow this story. Be assured, I’m watching developments… In fact, I’m planning to go to Halifax this summer for that test launch. Thank you for subscribing and reading. Best wishes, Byron W. King Senior Contributor, Rude Awakening Senior Geologist, Jim Rickards' Strategic Intelligence Global Favorite Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… Here We Go Again: AAA-Rated Bond Loses 26%. SEAN RING AAA-Rated MBS Tranche Loses 26% Think of the financial markets as a skyscraper. The least risky securities make up the foundation. The most dangerous stuff is on top. When the foundation starts shaking, it’s only a matter of time until the top of the skyscraper is visibly vacillating in the moonlight. We’ve just seen the first signs of a new crisis. Its sudden downturn is a warning sign that the entire financial structure is at risk. The news is the good tranches (it means “slices” in French) of mortgage-backed securities are wobbling. But before I delve into the current situation, let’s revisit some history. If you’ve seen The Big Short, you’re already familiar with the 2008 Financial Crisis. If not, I’ll guide you through it, as it holds crucial lessons for our current market. MBSs and the 2008 Financial Crisis The 2008 financial crisis, a monumental event in the history of global finance, is often remembered for the dramatic stock market crash in October 2008. However, the roots of the crisis lie deeper in the collapse of mortgage-backed securities (MBSs) well before the market fell. The Housing Boom and Subprime Mortgages In the early 2000s, the United States experienced a significant housing boom fueled by low interest rates and a surge in subprime lending. Subprime mortgages were loans given to borrowers with poor credit histories, typically at higher interest rates, to compensate for the increased risk. Do you remember NINJA loans? NINJA stood for No Income, No Job or Assets. Banks and financial institutions, seeking higher returns, aggressively issued these asinine loans with the government’s eager help. The Mechanics of MBSs MBSs are financial instruments created by pooling various home loans and selling the resulting cash flows to investors. (Commercial MBSs package corporate real estate.) This process, known as securitization, was designed to spread risk and provide liquidity to the housing market. However, the increasing inclusion of subprime mortgages within these securities introduced significant risks into the system that the idiot quants thought would cancel each other out. Housing Prices Peak and Begin to Decline By 2006, housing prices had reached unsustainable levels. As prices began to decline, homeowners with subprime mortgages couldn’t sell their homes, leading to a rise in mortgage defaults. The decline in housing prices crushed the value of MBSs, causing significant losses for investors. The Collapse of Bear Stearns In June 2007, Bear Stearns, a major investment bank, announced the collapse of two hedge funds heavily invested in subprime MBSs. This event was one of the first major indicators of the looming crisis and highlighted the vulnerabilities within the financial system. The Domino Effect IndyMac Falls IndyMac Bank, a major mortgage lender, faced a similar fate. Specializing in risky home loans, IndyMac was heavily exposed to the subprime market. In July 2008, the bank was seized by federal regulators after a bank run, marking one of the largest bank failures in U.S. history. The failure of IndyMac underscored the widespread risks within the mortgage lending industry. The Lehman Brothers Bankruptcy Lehman Brothers, another major investment bank, was heavily exposed to MBSs. As the value of these securities plummeted, Lehman struggled to stay afloat. In September 2008, the bank filed for bankruptcy, marking the largest bankruptcy filing in U.S. history. The collapse of Lehman Brothers sent shockwaves through the financial system, leading to a severe liquidity crisis. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson let Lehman fall without knowing the knock-on effects. And you wonder why we don’t trust the “experts.” [Trump, Biden, _______?]( There are three potential outcomes of the 2024 presidential election – and not a single one is good for the American people. In fact, the secret “third candidate” that no one’s talking about poses the biggest threat of all… [His identity revealed here](. [Click Here To Learn More]( The Broader Impact The Role of Credit Rating Agencies Credit rating agencies played a significant role in the crisis by assigning high ratings to MBSs despite the underlying risks. These ratings misled investors into believing the securities were safe, exacerbating the eventual collapse. The failure of credit rating agencies to accurately assess the risk of MBS was a critical factor in the spread of the crisis. If you saw The Big Short, you may have laughed that they portrayed [the credit ratings agency lady as visually impaired](. If you want to read about my old girlfriend at S&P and how she taught me about all this, read “[Credit Ratings and Old Flames]( from the June 2, 2021, edition of the Rude. Government and Regulatory Response The U.S. government and regulatory agencies took several measures to address the crisis. The Federal Reserve provided emergency funding to struggling financial institutions, while the Treasury implemented the Troubled Asset Relief Program (TARP) to purchase toxic assets and inject capital into banks. These measures aimed to stabilize the financial system and restore confidence. It also blew out the Fed’s balance sheet. The Bailout of AIG AIG, a global insurance giant, faced enormous losses due to its exposure to MBSs and credit default swaps. In September 2008, the U.S. government stepped in with an $85 billion bailout to prevent the company's collapse, highlighting AIG's systemic importance and the financial system's interconnectedness. Lessons (Not Really) Learned and Reforms Dodd-Frank Wall Street Reform and Consumer Protection Act The U.S. Congress passed the Dodd-Frank Act in 2010 in response to the crisis. This comprehensive legislation aimed to prevent future financial crises by increasing regulation and oversight of the financial industry. Key provisions included the creation of the Consumer Financial Protection Bureau (CFPB), stricter capital requirements for banks, and enhanced regulation of derivatives. The Volcker Rule The Volcker Rule, a key component of Dodd-Frank, prohibited banks from engaging in proprietary trading and limited their investments in hedge funds and private equity. The rule aimed to reduce risk-taking by banks and protect consumers from the fallout of risky financial activities. Did any of this work? Ongoing Challenges and Future Outlook Current State of MBSs For about five years after the crisis, the MBS market was dead. Nothing was happening. Then, the banks realized the Fed was “never” going to raise rates. Despite flirting with rate hikes at the end of 2018, the Fed didn’t commit to that strategy until 2022. While the market for MBSs has recovered, the structure and regulation of these financial instruments have changed significantly. Stricter underwriting standards and increased transparency aim to prevent a repeat of the 2008 crisis. And yet… What Just Happened According to [Bloomberg]( For the first time since the financial crisis, investors in top-rated bonds backed by commercial real estate debt are getting hit with losses. Buyers of the AAA portion of a $308 million note backed by the mortgage on the 1740 Broadway building in midtown Manhattan got less than three-quarters of their original investment back earlier this month after the loan was sold at a steep discount. It’s the first such loss of the post-crisis era, according to Barclays Plc. All five groups of lower ranking creditors were wiped out. Market watchers say the fact the pain is reaching all the way up to top-ranked holders, overwhelming safeguards put in place to ensure their full repayment, is a testament to how deeply distressed pockets of the US commercial real estate market have become. Here we go again. My esteemed colleague Jim Rickards said after the March 2023 bank crisis that we were in the eye of the storm and not out of it yet. Once again, he called it correctly. If we take the time from the first failings of MBSs during the crisis to the stock market capitulation of October 2008 and apply that to now, we should see a market crash in about a year. There’s no guarantee of that, of course, but it means we may have time to harvest upside gains thanks to a “crack-up boom” before we hurry to the sidelines. Wrap Up The 2008 financial crisis was a complex event driven by the collapse of MBSs and the interconnectedness of the financial system. It highlighted the dangers of excessive risk-taking, inadequate oversight, and the failure of critical institutions. While significant reforms have been implemented to prevent a repeat of the crisis, they have yet to prove successful. MBSs, once seen as a tool for spreading risk, became a catalyst for one of the most significant economic downturns in history. The lessons we didn’t learn from the crisis continue to plague our economic policies and market regulation. We could see a repeat of the 2008 mess, only worse, in the coming year. But that doesn’t mean to sell right now. It means to keep a weather eye out for trouble. Hold ‘em, don’t fold ‘em. We’ll need to run in a bit, though. All the best, Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. 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