Thursday, June 23, 2011

Eric Reguly on: Why doesn't Canada have more top companies?

My posted comment on the Eric Reguly artcile entitled: Why doesn't Canada have more top companies?:

Canada doesn't have more top companies for the simple fact that Canadian companies and CEOs do not know how to compete. Canadian companies and CEOs are coddled at every opportunity by the policies enacted by their closely held and controlled politicians. In the US they have the industrial military complex to worry about, Here we have the CEO-politician complex. What do you possibly think was behind the killing of income trusts, if not to destroy the competition that trusts represented for these coddled CEOs who sought to kill them as competition, (read: Gwynn Morgan, Dominic D'alessandro, Paul Desmarais Jr. etc etc) and which threatened the established order by the placing of shareholders' rights ahead of the greed driven CEOs?

What else did CEO lobbyist John Manley means when he said "you can't have two different structure for the same businesses" in arguing to kill the one structure that was in the best interests of the country, while preserving the one that is rife with abuses and bad for the country in the short, medium and long term?. Too bad dolts like Eric Reguly were too stupid to understand the game that was being played, and how he was being gamed by the CEOs to advance their world of coddled CEOs who are incapable of competing.....even in their own lousy back yard, let alone on a world stage.

Wake up Eric! You're so easily duped and manipulated, you could be a lazy non-competition engendering Canadian Politician like Jim Flaherty yourself some day too!

Why doesn't Canada have more top companies?

Globe and Mail
June 23, 2011

Aren’t we clever? Our Top 1000 lists more than 30 Canadian companies with profits of $1 billion or more in 2010, a remarkable achievement given the worldwide corporate bloodletting since the 2008 financial crisis. Most Canadians know the names of the biggies, from Royal Bank to Rogers Communications, and probably consider them money-spinning proof that we can compete with the best of the best.

When I look at the list, however, my heart sinks. I recognize every one of the top 100, but I can only spot three, maybe four, that: a) compete in the international big leagues, b) have a brand that is known outside Canada and c) are making news. They are: Research In Motion, Thomson Reuters, Bombardier and perhaps Royal Bank or Barrick Gold. A few years ago, I would have put Manulife among that group, but its image has waned in the post-Dominic D’Alessandro years.

Congrats to those four, even though each lacks the “cool” factor that has, for instance, made Apple a supernova. So why doesn’t Canada have more international corporate champions?

Some of the world’s smaller countries, by population, are home to global giants. Australia has BHP Billiton, Rio Tinto and Macquarie Group. Switzerland has NestlĂ©, Syngenta, Glencore, UBS, Novartis and Xstrata. The Netherlands has Shell, ING and Philips. Sweden has Volvo, Ericsson and Ikea.

There’s no paucity of excuses from Canada’s political right, middle or left for our poor global showing. Corporate tax rates are too high? They’re among the lowest in the Western world. There’s too much government coddling? There’s too little. Canada is too small? The Swiss wouldn’t buy that argument. Costs are high, and training and education are inadequate? CEOs can’t endure Canada’s winters? Celine Dion intolerance? Blah, blah and blah.

Here’s my reason: epic Canadian investor greed.

I’ve worked as a business journalist in four countries—Canada, the United States, Britain and Italy—and nowhere have I witnessed greed to rival Canadian greed. From 1997 to 2007, I felt all I did was chronicle the eradication of corporate Canada as investors, and CEOs who encouraged them, hit the sell button. Here are just a few of the companies I no longer write about: Inco, Falconbridge, Dofasco, Stelco, Algoma Steel, MacMillan-Bloedel, Molson, Alcan, Ipsco, Gulf Canada, Newbridge Networks, Poco Petroleums and Masonite.

The sellout continues. In February, the successful TMX Group agreed to sell itself to the inferior London Stock Exchange. The TMX should have been the buyer.

Last year, Potash Corp. of Saskatchewan almost became another hollowing-out victim. True, CEO Bill Doyle fought off BHP Billiton, but I don’t think he wanted to keep the world’s biggest fertilizer company in Canadian hands to generate local wealth and jobs. The share price wasn’t to his liking, and as things turned out, the takeover was blocked by the feds.

To be sure, each sellout is a special case. In a few takeovers, such as Falconbridge, the offering price was so huge that sellers would have been foolish not to take the loot and run. But others were just instances of plain, short-term greed. Canadian investors would rather take even a meagre payout today than stick with a company for years to create a world-beater.

Of course, short-termism isn’t uniquely Canadian, but patience often generates even bigger rewards. When Ralph Robins was CEO of Rolls-Royce in the 1990s, he earned no love from British investors and analysts by investing fortunes in jet-engine technology that wouldn’t pay off for years, if at all. But Sir Ralph refused to cave in to the gimme-returns-now mob. Today Rolls is one of the world’s top manufacturers and tech innovators.

That stick-to-it attitude is almost extinct in Canada. Evidence? How about the big push early in the last decade to turn corporate Canada into one monstrous, bloated income trust?

The income trust was a peculiar beast—discouraged or outlawed in many civilized countries—that avoided taxes by paying out almost all cash flow to unitholders. But that left little money for R&D, corporate development or overseas expansion. When Telus and BCE, Canada’s two largest phone companies, announced their intention to convert to trusts in 2006, Finance Minister Jim Flaherty did the right thing and shut down the party. Five years later, investors still moan about that.

In 2008, Don Argus, then-chairman of BHP Billiton, the world’s largest mining company, denounced Canada’s sellout culture. “Canada’s policies are a worst-case scenario,” he said. “Canada has lost more head offices than any other country. Canada has already been reduced to an industry branch office and is largely irrelevant on the global mining stage.”

Policies? I don’t know if there are any. For every buyer, there’s a seller. Canadians love to sell. Yes, we have many companies in safe, protected industries that are making billions in profits. Sadly, most of them are nonentities on the world stage.

Wednesday, June 22, 2011

Hunt for yield creates new risks: BoC

My posted comment to today's Financial Post article entitled: "Hunt for yield creates new risks: BoC":

Just another of the obvious "unintended consequences:" that CAITI (www, caiti, info) has been talking about since its inception in December 2006. Only took Mark Carney the better part of 5 years to realize the folly of his idiotic ill-conceived and ill-executed actions of killing income trusts ( on the totally false premises of alleged "tax leakage") and the certainty that his actions against yield hungry investors would spawn more Asset Backed Commercial Paper schemes or Manulife Income Plus near disasters to come to pass.

What a clueless idiot we have for Governor of the Bank of Goldman Sachs in the person of Mark Carnage.

Hunt for yield creates new risks: BoC

Barbara Shecter
Financial Post
Jun 22, 2011

The sort of low-interest-rate-driven risk taking that lead to the 2008 global financial crisis is on the rise and posing an increasing threat to the stability of Canada’s financial system, the Bank of Canada said Wednesday.

“The popularity of riskier securities and strategies is growing” both globally and in Canada, the central bank said in its bi-annual Financial System Review released Wednesday, highlighting the boom in lower-grade bonds that is drawing in new investors who may not be aware of the risks.

While stimulative monetary policy is needed to support the global economic recovery,” a long period of low interest rates may fuel excessive risk-taking,” the report said, noting that this risk to the system has increased since its most recent report in December.

The report highlighted the role of misunderstood investments — notably asset-backed commercial paper — in the most recent market meltdown a few years ago.

This “search for yield could cause risk to be underpriced or lead investors to take on exposures that they may not be able to manage” if the global economy falters, the stability report said.

In particular, Wednesday’s report points to the growing popularity of non-investment-grade bonds and the near historically low price of their credit risk relative to government bonds.

“It is uncertain whether all new investors have the ability to adequately manage the risks associated with these securities and investment strategies,” the report says.

The report also cited “covenant lite” loans that delay the pain of likely defaults, and complicated developments in exchange-traded funds in Europe.

Global economic issues including the high risks associated with sovereign debt continue to put pressure on financial stability, edging higher in the most recent period, according to the report which also urged “further moderation in the pace of debt accumulation” by Canadian households.

While economists at TD Bank do no expect interest rate hikes before 2013, that could change if other risks looming over the Canadian and Global landscape were to abate in the coming months. In such a scenario, “the Bank of Canada could very well start to lift rates before the year is up,” a TD report concluded.

The central bank also warned Wednesday that Canadian institutions could be put at a disadvantage in the global move to regulate derivatives, and made a strong case for a domestic solution to meet G20 commitments to stability-driven central clearing and settlement.

The bank, which is playing an active role in the country’s G20 commitments on the regulation of derivatives, highlighted risks of electing to have over-the-counter derivatives contracts cleared by central counterparties (CCPs) outside Canada.

“Global CCPs may not provide a level playing field to Canadian dealers that are smaller than the global dealers,” the report warned, adding that “offshore clearing may not provide the public sector with sufficient scope for oversight or control to mitigate and manager the effects of a financial crisis.”