Wednesday, May 20, 2009

Capital Markets bozos like John Manley


I will save you the trouble of responding to Derek DeCloet’s question below

Derek is fundamentally mistaken in his view (i.e, sweeping assumption) that the income trust issue is one that revolves around taxes and that some tinkering with the tax treatment of dividends will some how address the “problem”.

The “problem” ( if you can call an abundant source of lower cost of capital to be a “problem”, given it is coming at no cost to the government’s tax revenues) of income trusts being more highly valued in the marketplace that corporations has ZERO to do with what Derek is assuming. Income trusts trade at a higher value because people like you and me pay a premium for a company that pays out all of its excess earnings to its unitholders ( by tax law) and does not make acquisitions that are not accretive (by convention). That’s the whole thing in a nutshell......and lost on Derek and the world including bozos like John Manley and others who are cheerleaders for something they fundamentally do not understand and prescribe “solutions” and theories to that make no sense.

But what would I know, as I only spent 25 years in investment banking servicing the needs of corporations by understanding the needs of investors? I didn’t become the Head of Equity Capital Markets at BMO by blowing smoke up some politician or bureaucrat in Ottawa or Queens Park. I didn’t raise over $50 billion of equity capital ( which is $50 billion more than Mark Carney) without understanding a thing or two about how the Canadian capital markets work. And I didn’t get involved in selling off Canadian companies to foreigners (like Mark Carney did), but rather was involved in the repatriation of Canadian ownership of many large Canadian companies from foreign interests, like Suncor from Sun Oil or Stone Consolidated from Stone Container, which is why I find the income trust tax so sickening, since apart from being based on the totally fraudulent argument of tax leakage, it was obvious to anyone with any rudimentary knowledge of the capital markets (perhaps that excludes Mark Carney, but certainly excludes Harper and Flaherty and Jack Layton) that this policy would lead to REAL TAX LEAKAGE from the wholesale foreign takeover of devalued income trusts.

And the best argument that John Manley can muster is “we can’t have two different businesses taxes differently”, which completely ignores the fact that his employer (law firm McCarthy Tertrualt) is just one such business that is taxed differently and completely ignore the fact that he, like Derek DeCloet, completely misunderstand what is at play here. If John Manley actually understood this issue, he would realize that his argument would be better rephrased as “We can’t have two different businesses operated differently”.

How dumb would that be for an argument?

Deserving of Bozo the clown, would be my answer. Especially in light of the abuses by corporations that lead to the global financial meltdown. If you were going to pick one model of business form to the exclusion of the other, it sure wouldn’t be the corporate model versus the income trust model.

People like John Manley and Derek DeCloet want to negate the benefits of something that is INNATE to what an income trust is, in terms of being a superior business model. in the belief that somehow that is a problem, and do so by way of imposing increased tax burdens on income trusts, until the point is reached were the natural advantage is rendered non-operative, much like when I wrote about assessing Tiger Woods with a five stroke penalty, because he has a natural innate advantage over other lesser players.

Maybe John Manley and Derek DeCloet should take their great theories of the universe to the PGA, and get laughed out of the room.


On 19-May-09, at 5:23 PM, DeCloet, Derek wrote:

Hi there -- just wondering if you read the material I sent you. Thanks.


From: DeCloet, Derek

Sent: Friday, May 08, 2009 1:00 PM
To: 'Paul Muser'
Subject: RE: Question from Derek DeCloet of the Globe Re: BCE pays ZERO TAXES

Mr. Muser

I didn't go to Brent's blog. All I saw was a headline that seemed to imply BCE investors are paying zero taxes, which we all know is not true. So I send him a one-line e-mail.[To which Brent responded here] Anyone who has carefully read what I've written on this subject recently knows my opinion: that the government should re-open the question of double-taxation of investment income within RRSPs/deferred accounts -- both as it applies to income trust distributions and dividends.

I understand why people to are outraged by the income-trust tax, but why aren't they equally outraged about the way dividends are taxed? After the policy change on trusts, there's not much difference.

thanks for writing. see below for my most recent two articles on the subject. Please read them and then tell me if you really think I've ignored this issue.


A wee tax change would be stimulating

Globe and Mail
Tuesday, December 16, 2008

Hands up if you have a better way to tax trusts

Globe and Mail
Tuesday, September 18, 2007


Anonymous said...

Hey! Back off on the name calling! Manley doesn't deserve this!


CAITI said...


With the greatest respect for you, I strongly recommend that you read the piece and fully comprehend it before passing judgment, because Manley DOES deserve this!

Manley hasn’t got a clue what he’s talking about. Apart from being a “bozo”,in my opinion, he is being grossly hypocritical, as he works for a different type of business that is taxes differently, plus this policy of Flaherty’s simply shunts these different types of businesses that are taxed differently into the hands of the pension funds. How is that a “solution”? From the vantage point of my 25 years of investment banking experience, it is obvious that John Manley hasn’t got a clue.

These people get all their advice from people on Bay Street who are grossly conflicted. They bring no practical knowledge or insight of their own to the table.

I can’t help other people, like Manley, who weigh in on matters of public policy with no understanding of the situation or no experience on the matters they profess knowledge of.

John Manley is not deserving of some type of “halo” treatment. Although that is the only reasons his views are accorded with special mention by the press. As for me, his arguments stand on their own merit. Unfortunately his arguments have no merit.

Maybe I should have used the term “uninformed neophyte” instead of “bozo”. The possible choice of words were endless.