Friday, June 13, 2008

More single data point journalism from the National Post.

Silcoff takes over from Corcoran

Here’s a novel thought for Sean Silcoff to ruminate in his single data point journalistic account of why income trusts are bad by citing Precision Drilling, and only Precision Drilling, as he attempts to connect a line between one about letting investors decide where they put THEIR money rather than having reporters or the users of capital do it for them through the auspices of a crooked and incompetent government and enforced through fraudulent legislation?

Sean Silcoff is arguing for a world in which the masters work for the servants. I have news for Corporate Canada and reporters. Investors are the masters. CEOs the servants.

Why can Teachers (hypothetically) own Precision Drilling as a trust and everything is honky dory and they not pay tax? Or the Public Sector Pension Plan acquire deeply discounted and devalued Thunder Energy Trust, as occurred in 2007....or Abu Dhabi Sovereign Wealth Fund acquire deeply discounted and devalued Prime West Energy Trust in 2007 and not a peep of discontent from the likes of Silcoff?

How does that solve a problem that is alleged to exist? Instead it creates a new problem, where none previously existed.

Silcoff should at least attempt to be consistent, if only consistently wrong. Or does he come from the world where what’s bad for the goose, is good for the gander.

Why do I think he ghost writes for the CCCE?


Anonymous said...

Investors make investment decisions. Not the users of capital. Not governments fronting for users. And not reporters fronting for governments AND users.

A virtual virtueless cabal.

Newspapers in Canada are a disgrace. How can we have a great country with a lousy press? Impossible. Fix the press and you'll fix the country.

Harper wouldn't last a second with a free press and the resultant informed electorate.

Dr Mike said...

Who is this Silcoff guy anyway & how did he jump to a conclusion that all trusts are bad.

A wild assumption even for a media hound.

Do these guys do no research on their own for goodness sakes.

There are certainly trusts who do not belong in this structure as there are many examples of corporations who have gone into the dumper because of the structure they were under---there are clunkers in every box!!

Painting everything with a single brush stroke is a lazy man`s way out.

Next time Mr Silcoff do the homework---if not , just ask , we have the info & will gladly share.

Dr Mike Popovich

Anonymous said...

Institutional investor claims that the single data point known as Precision Drilling doesn't stand to scrutiny in explaining Silcoff's unified theory of income trusts

I received the comments below from an institutional investor on Bay Street. Perhaps Sean Silcoff could let us know how these points were overlooked by his sources and whether his single data point holds to scrutiny, since we know his grand extrapolations and unified theory of income trusts being “bad”, don’t:

Brent Fullard.

Comments of Institutional Investor:

Ninety percent of the performance difference between the Weatherford (a U.S. driller) and Precision Drilling (Canadian division) over the past two years can be explained by the difference in drilling levels and rig utilization rates between the US industry and their Canadian counterparts. Experience investors know this. It was the development and early adoption of the horizontal multifrac drilling technology to shale gas plays in east Texas and Oklahoma, plus the lower cost structure of the US industry that drove the divergence. You could draw the same performance comparison between any Canadian corporate driller and a US driller regardless of the structure. But if don’t understand the industry, you wouldn’t know that.

It’s easy to make assumptions after the fact in order to manufacture the outcome you want. Like assuming that all investors in Precision Drilling sold their Weatherford shares, even though they were investors in the oil and gas drilling industry, and the outlook for the US industry was much healthier than for the Canadian industry. Experience investors knew that because there was lots of research on the street telling them so. You would be better off to assume that experienced investors look at total returns by industry and are relatively agnostic about the combination of income and gains that get them there.

It’s also interesting to note that Mr Silcoff fails to mention all of the Canadian trusts that have used their currency to acquire US or other foreign businesses. In this vein he failed to mention companies like BFI Income Fund, Livingston, Energy Savings, Provident, Enerplus and Vermilion. Is that bad for Canadian business? Nor did he mention US based businesses that are listed as Canadian trusts: Keystone, Student Transportation or Medical Facilities. Also, compare the number of trusts that have been taken over by foreigners or foreign financed LBOs to that of corporate Canada takeovers. (i.e Alcan, Molson’s, Fairmount, Four Seasons, Inco, Falconbridge, and potentially BCE). Is that good for Canadian business? Experienced investors know it isn’t.

Anonymous said...

Just had to send a quickie email to Sean
Good Lord!

What on earth were you thinking, publishing a piece on a topic which you seem to have absolutely no knowledge.

It would be better if You did some DD (due diligence in the investing community) before going off half-cocked.

I think a correction is necessary. It could be a bit embarassing to admit you are wrong but might gain back some respect from readers and investors . . . oh yes and Bay Street.


Anonymous said...

Corcoran reminds me of the kind of journalists I met while working in Communist Poland. These Polish journalists were nasty, arrogant, uninformed, prone to slander those not agreeing with the Party line, dishonest, biased, manipulators of information, masters of disinformation, editorialists in the news, and most of all blindly devoted to the Party. They were one of the pillars of totalitarian Poland. I saw the same thing under Marcos in the Philippines and in other dictatorships were I worked such as Indonesia, Saudi Arabia and Nepal.

Clark Kent said...

We need a real newspaper in this country.

Anonymous said...

Sean Silcoff says "Precision was a poor candidate to become a dull, low-growth trust: it had real growth opportunities and good uses for its excess cash. Those were ejected, leaving new Precision CEO, Kevin Neveu, at a disadvantage as he tries to create Precision 3.0 into something more than a case study of why income trusts were bad for Canadian business."

There are a couple of useful points in Mr. Silcoff's comment. If Precision is a case study of why income trusts were bad for Canadian business, it will be the first such case for a generalization that has never been quantified or otherwise proved.

Second, what does "bad for Canadian business"? Bad for Canada? Bad for business? Or bad for Canadians? Canadian business is not a separate and distinct piece of reality like a corporation, or even an industry. If Mr. Silcoff wants to make an economic judgment about something "bad", he needs to do the good economics and say what the loss is and might the gain would be if the "better" had happened. Numbers Mr. Silcoff? Where are your numbers? Not for a "single point" (Fullard) but for an industry or sector or the Canadian economy.

Besides the economic analysis, some philosophical analysis is also needed. There is nothing in the nature of the corporate shell that guarantees economic well-being. A corporation, no less than an individual, can be mistaken or foolish or imprudent and suffer major losses. The problem is that corporations are run by people. In basic theory, the only economic difference between the typical behaviour of a corporation and a trust is that the trust has separated the return envelope from the reinvestment envelope. Typically, a corporation reinvests its return on capital. In basic theory, a corporation could (a) pay out a high dividend each year, and (b) invite the shareholders to sign to reinvest in the next year's capital investments. In theory, the rational shareholder will reinverst if the corporation has a higher rate of return than does the shareholder. Tax warps the investment analysis, even so at the end of the argument, we need to know "What is better for the owners of the business?" But now Mr. Silcoff's needs to answer a question. Who does the investment really belong to? The owners, or the shell?