Buy, sell, donate

By Jason Kirby - Thursday, July 28, 2011 at 1:20 PM - 2 Comments

Dominic Chan/CP

When the news first broke a few weeks ago that the Canadian Cancer Society spends more money fundraising than it does on cancer research, it set off alarm bells for many of the charity’s donors. Shortly after, the Canadian Press dug through tax filings of the country’s many registered charities and found that thousands of employees earn hefty six-figure salaries. The revelations raised questions about how charitable organizations use the money people give them. Which is why some say it’s time to start evaluating charities with the same unforgiving eye that equity analysts bring to valuing stocks.

“We could have a far more effective charitable sector than we have now, if funds are redirected properly,” says Greg Thomson, director of research at Charity Intelligence Canada, a Toronto organization that rates charities on their performance. “We’re trying to make it more market driven so that the charities doing a good job get more money and can expand, and the charities that aren’t are forced to pull up their socks.”

That’s not the type of language one normally associates with philanthropy. Neither are terms like return on investment, cost-coverage ratios and operating efficiencies—just a few of the measures this new breed of charity analysts like Thomson is using to scrutinize charities. While it may seem like there’s little in common between for-profit companies and philanthropy, the charity sector has become a big business. Last year, Canadians donated $6.5 billion and the sector employs more than one million people.

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Central bank battle

By Jason Kirby - Thursday, July 21, 2011 at 12:00 PM - 0 Comments

Cheap money pumped out by central banks has sparked a speculative frenzy in the commodity sector that has driven up prices for everything from gasoline to Corn Flakes.

Or it hasn’t, depending on who you ask.

It’s become one of the most critical economic debates facing the world, and it’s pitted the Bank of Canada against Japan’s own central bank. Last week, a BoC study concluded “financial speculation seems to have played a modest role” in rising commodity prices,” and that “the available evidence points to global demand and supply conditions” as the real cause. That’s in contrast to a report published three months ago by the Bank of Japan. While demand from emerging economies has driven prices, the BoJ admitted, “speculative investment flows…have amplified the intensity of the price surge.” And the jump in speculative money can be tied directly to lax monetary policies, it said.

Maybe the faceoff simply comes down to perspective. Resource-rich Canada will benefit enormously if the rise of commodities is in fact due to a permanent shift in demand. With almost no resources of its own, Japan can only hope that as central banks tighten the reins, speculators abandon their bets on commodities, and prices finally fall back to Earth.

The Great White tax haven

By Jason Kirby - Tuesday, July 19, 2011 at 9:10 AM - 12 Comments

Getty Images

Until last year, Peter was a successful American fund manager, with roughly 200 employees in New York City and a personal fortune of $100 million. That’s still the case today, save for one detail—Peter is no longer an American. In 2010, the U.S.-born executive took the extreme step of renouncing his American citizenship. “I wanted to remove myself from a society and country that was heading for a financial catastrophe,” Peter said in an email interview through his Toronto-based lawyer, David Lesperance, who specializes in “tax-efficient citizenship, residence and domicile solutions.” In other words, Lesperance moves rich people to places where they’ll pay less tax. So which global tax haven lured Peter (not his real name) away from Uncle Sam? Was it the Cayman Islands? Switzerland? Monaco?

Try Canada. A year and a half ago, Peter moved to Toronto and is well on his way to obtaining his Canadian citizenship. He bought a luxury home in the city, as well as a vacation property. And now he’s in the midst of determining how much of his fund management company to uproot from New York and move across the border. “Five years ago, I would not have considered expatriation as an option, especially to Canada,” he said. “I always thought of Canada as a younger sibling of the U.S.—the same, but less advanced in terms of culture, quality of life, business opportunities and above all, taxation. I now see it as the same, but maybe better in the long term.”

As for those taxes, Peter says he’s fed up with his money going to pay for what he considers needless trillion-dollar wars in the Middle East, and to cover the staggering interest charges America owes on the money it’s borrowed to live beyond its means; by the end of this decade, at least 18 cents out of every $1 of tax revenue America raises will go to interest payments. “I know I get more for my taxes in Canada,” he says. “And the debt levels here are reality-based.”

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Reining in the mortgage king

By Jason Kirby - Monday, July 11, 2011 at 9:15 AM - 2 Comments

In March, Maclean’s warned that the Canada Mortgage and Housing Corporation, the quasi-governmental insurer that underwrites $500 billion of residential mortgages, answers to no one—not Canada’s top financial regulator or even the minister of finance. That all quietly changed last month when Ottawa passed a law that puts the CMHC strictly under the watchful gaze of both the finance minister and the Office of the Superintendent of Financial Institutions (OSFI).

With the new law, CMHC must hand over “prescribed books, records and information” and make those records available to the public. The legislation also allows the minister to set capital requirements and impose fees to compensate the government for the risks it assumes by backstopping mortgages.

CMHC has always said the money it sets aside to cover insurance losses exceeds that required by OSFI. But Finn Poschmann, a C.D. Howe researcher, told the House of Commons finance committee the new law is overdue. “There are a number of informal arrangements through which our oversight agencies are able to have a look at what it is that the CMHC does and the risks to which taxpayers are exposed,” he said. “However, it is an informal arrangement. It’s good to have this in legislation.”

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Carmaker comeback

By Jason Kirby - Monday, July 11, 2011 at 9:05 AM - 0 Comments

Jim R. Bounds/Bloomberg/Getty Images

In 2009, when there seemed no bottom to how far the economy might fall, a series of photographs circulated online showing thousands of unsold cars piling up around the world. With consumers paralyzed by the credit crisis, automakers filled docks, vast meadows and even abandoned airport runways with the vehicular glut. The striking yet surreal aerial photos could have hung on a gallery wall were it not for the economic devastation they represented. Today, some economists are once again warning the world is on the cusp of another crisis as Greece burns, gas prices remain high and America’s job market stagnates. Only this time instead of pulling down the global economy, the auto sector is seen as the best hope of jump-starting the recovery.

Call it Cars 2—not the animated big-budget sequel making its way through theatres, but the return of cars and trucks as key drivers of the critical U.S. economic machine. “Americans still love their cars,” says Michael Burt, who tracks industrial economic trends for the Conference Board of Canada. “The types of vehicles they may purchase will change, but they’re continuing to buy.” The question now is, how long can America’s love affair with metal and rubber overcome the economic headwinds?

On the surface, the auto sector’s performance in June seemed disappointing. When American sales for the month were tallied, the results fell short of analysts’ forecasts. Sales growth came in at 7.1 per cent, according to Autodata Corp. That was less than the eight to 10 per cent analysts had predicted, and slower than the growth registered in May, which was already a sluggish month.

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Free food fight

By Jason Kirby - Thursday, June 9, 2011 at 12:25 PM - 1 Comment

Photograph by Cole Garside

By 8 a.m. Tuesday morning, the breakfast sandwich assembly line at the Subway restaurant on Granville St. in downtown Vancouver was in overdrive—English muffin, pre-cooked egg, sliced ham and cheese, then into the oven. Brush away crumbs. Repeat. Despite the frantic pace, the lineup spilled out the door and down the street, drawn by that siren call of the tired and hungry morning consumer—a free breakfast and coffee.

There may be no such thing as a free lunch, but when it comes to breakfast, fast-food chains are doling out meals and coffee to anyone who’ll take them. Last November, Burger King Canada gave away free coffees every Friday, having earlier handed out complimentary breakfast sandwiches. Subway’s one-day breakfast and coffee giveaway was its second in 10 months. Meanwhile, McDonald’s has blitzed the morning crowd with free coffees five times since 2009, with each event lasting between one to two weeks.

The goal is invariably the same each time—to get as many new people as possible to try their offerings with the hope that some moochers come back for more as paying regulars.

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Econowatch: June 2011

By Jason Kirby - Friday, June 3, 2011 at 9:30 AM - 3 Comments

When the U.S. economy crashed in 2008, taking the world with it, central bankers grabbed their defibrillators and headed for the emergency room. To shock their economies back to life, interest rates were slashed nearly to zero. Then when it was clear the American patient would survive, but remained dangerously weak, the U.S. Federal Reserve administered a bold new treatment: quantitative easing, by which it created trillions in new money to stimulate growth.

Well, in just under a month, the latest round of quantitative easing, more commonly known as QE2, will end. Meanwhile, here at home, the Bank of Canada faces pressure to raise rates. Last week, the Organisation for Economic Co-operation and Development said the B of C should put an end to its “highly stimulative” monetary policy to keep inflation in check. Opinions are divided over what comes next. Optimists argue the U.S. economy can stand on its own. Companies are profitable and the job market is improving. Besides, interest rates in the U.S. will still be near record lows. On the other hand, the easy money that’s helped drive up stock markets could be bad. Albert Edwards, a strategist at French bank Société Générale, shares this view in the extreme. He warns the end of QE2 will cause a “deflationary bust” and send the S&P 500 stock index down 70 per cent.

As for Canada, the recession was never that bad to begin with. The key reason B of C governor Mark Carney kept rates low is to prevent the loonie from strengthening further and hurting exporters. An end to QE2 might even help in that effort, since the greenback is expected to rise after the program ends.

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The real problem with Vancouver's outrageous house prices

By Jason Kirby - Wednesday, June 1, 2011 at 4:50 PM - 56 Comments

A Chesterman Beach home in Tofino, B.C., listed for $7.6 million, is shown on Thursday, June 9, 2005. High house prices in the Vancouver Island town are driving some residents out. One realtor said 12 Tofino residents have bought Ucluelet properties in the past two years, and five more are looking. (CP PHOTO/Keven Drews)

The international media have finally clued in to the wackiness on Canada’s west coast, otherwise known as the Vancouver real estate market. Last month Bloomberg noted that when compared to median household incomes Vancouver homes are more expensive than even New York. The story linked soaring prices to the influx of wealthy buyers from mainland China. Today the Wall Street Journal retraces the exact same material. The warning in both pieces is clear: Vancouver’s housing market has become disconnected from reality and is primed to crash.

This little 3 bedroom, 1 bathroom bungalow in Vancouver is priced at $1.5 million. The listing suggests buyers just tear it down and build a new home.

This is a well worn theme for many Canadian reporters. Here at Maclean’s we’ve reached the same conclusion several times going back to 2008, and, admittedly, we’ve been proven fully and completely wrong. I still think prices here in Vancouver are nuts, but each day as I walk to work past the high-end coffee shops and panhandlers I see more “For Sale” signs going up, along with plenty of “Sold” stickers, too.

But here’s the thing. The real threat to Vancouver isn’t that the housing market might crash. That’s happened here before. It undoubtedly will happen again. Such is the boom & bust nature of real estate in Lotusland.

Far more insidious is the impact housing unaffordability is having on employers and the broader economy. Continue…

Real estate porn: The 15 most expensive homes in Canada

By Jason Kirby - Thursday, May 19, 2011 at 2:40 PM - 4 Comments

According to a new report from Re/Max, sales of luxury homes in Canada—the land that the global housing correction, and gravity for that matter, forgot—are exploding. Here’s the breakdown from the release.

$2 million is nothing to sneeze at, but in Vancouver there are crack shacks worth nearly that much. If you really want to talk luxury, set your sights higher. So without further adieu, here’s a countdown of the 15 most expensive homes in Canada right now, as drawn from the real estate industry’s listing service, Realtor.ca, after the jump…

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When presidents and PMs give investment advice: The ultimate insider information

By Jason Kirby - Thursday, May 12, 2011 at 6:43 PM - 3 Comments

(AP Photo/The Daily Texan, Tamir Kalifa)

In his daily briefing email this morning, New York investment strategist Edward Yardeni pointed out President Barack Obama not only called the bottom of the stock market in 2009, he forecast the recent collapse in commodity prices, too:

I guess we should pay closer attention to President Barack Obama’s investment advice. On April 19 he called the top in commodity prices, in general, and oil prices, in particular, when he said, “It is true that a lot of what’s driving oil prices up right now is not the lack of supply. There’s enough supply. There’s enough oil out there for world demand,” Obama said. “The problem is…speculators and people make various bets, and they say, you know what, we think that maybe there’s a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we’re going to bet that oil is going to go up real high. And that spikes up prices significantly.” Remember that on March 3, 2009, our nation’s Chief Strategist told us to buy stocks: “On the other hand, what you’re now seeing is–is profit and earning ratios are–are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it.” He is on a roll.

As you’ll no doubt recall, Obama wasn’t the only world leader to slap a “buy” recommendation on markets in those dark days. Prime Minister Stephen Harper took a lot of knocks in October 2008 when he went on CBC and told Canadians the upheaval in the stock market was a time to get in.

Harper: “The stock market will sort itself out. I suspect some good buying opportunities are opening up with some of the panic we’ve seen in the stock market in the last few days.”

Peter Mansbridge: “Do you really want to be heard saying that? Are you suggesting people should be buying?”

Harper: “I think there are some great buying opportunities out there.”

As it turned out, he was right, if a bit early. Markets continued to fall until the following March, but if you took the PM’s advise and bought, say, the S&P/TSX Composite Index, you’d be up roughly 25 per cent today. (I looked, but couldn’t find any recent comments from Harper that related to the current bubble in commodity prices.)

So, should you listen when pols say buy? Obviously politicians will say anything if they think it will make voters happy, and like perma-bulls, they’ll never, ever issue a sell call, no matter what.

Still, there’s value in at least considering their words when it comes to the broad sweeps of the economy. After all, they do have  their hands on the levers of government spending, which they both used to deploy billions of dollars for infrastructure projects, tax cuts and bailouts. Both were no doubt aware of efforts by their respective central bankers to employ considerable monetary stimulus to reboot the economy. In the case of Obama’s sell recommendation for commodities, it came just weeks before the Chicago Mercantile Exchange hiked margin requirements for energy futures traders, a move that regulators and politicians had been pushing for, and which accelerated the commodity sell off.

Whatever your views on government stimulus and intervention in the economy, there’s no denying each leader has the power to influence consumer and investor sentiment with their policies. In other words, Harper and Obama can be seen as the ultimate insiders.

So, Mr. Prime Minister and Mr. President, got any stock tips?

Obama’s best friends

By Jason Kirby - Thursday, May 5, 2011 at 11:15 AM - 1 Comment

Jim Young/Reuters

U.S. President Barack Obama’s latest Facebook update was well above the usual fare of Farmville alerts and motivational quotes. On a trip to Facebook’s head office for a town hall meeting last week, Obama declared America’s finances to be “unsustainable,” and took a few swipes at his Republican opponents. But Obama’s visit also highlighted his increasingly close ties to some businesses. This wasn’t Obama’s first Silicon Valley sojourn. He has visited the Googleplex and has appointed General Electrics CEO Jeffrey Immelt to head an economic advisory panel. And he’ll forever be associated with General Motors for the mega-bailout. Whether the ties are good for the companies or Obama is debatable. Outrage over GE’s low tax bill and indications Facebook may block some content in China haven’t made either very popular. But then again, polls say Obama’s popularity is tanking too, so it’s a two-way street.

In conversation: Paul Allen

By Jason Kirby - Wednesday, May 4, 2011 at 11:05 AM - 0 Comments

Photographs by Chris Lane/Getty Images

Paul Allen co-founded Microsoft with Bill Gates, but left after he was diagnosed with Hodgkin’s lymphoma in 1982 and the two men had a falling out. Since then, Allen has used his fortune, estimated at US$13 billion, to buy sports teams, a submarine, build rocket ships and fund brain research, among other pursuits. In his new book Idea Man, which he wrote after a second cancer scare, Allen delves into his partnership with Gates and how it sparked the personal computer revolution. But he also reveals that working with Gates could be like “being in hell.”

Q: It’s been two years since you were diagnosed with cancer for the second time in your life, this time non-Hodgkin’s lymphoma. How is your health today?

A: It’s good. I still have a few small after-effects, but I get tested every few months to make sure I’m still in remission. But I’m doing wonderfully better than when I was really sick when I first started on the book.

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An eye for sales

By Jason Kirby - Monday, May 2, 2011 at 9:00 AM - 10 Comments

Photographs by Brian Howell

Each day, online retailer Coastal Contacts of Vancouver ships 6,000 orders of eyeglasses and contact lenses to customers around the world. It’s no surprise, then, that Roger Hardy, the company’s founder and CEO, keeps bumping into Coastal’s patrons. Just two weeks ago when Hardy’s wife was in hospital to give birth, the attending physician learned where Hardy worked and said he now buys all his contact lenses through the site. “It was great to hear that kind of customer testimonial from someone in the medical profession,” says Hardy, “though the whole time my wife was there in very intense labour.”

Hardy had best get used to the attention. Coastal, which operates several vision-care websites, including Clearlycontacts.ca in Canada and Coastalcontacts.com in the U.S., has quickly emerged as the dominant force in the niche business of selling optical products online. With annual revenue last year of $153 million, Coastal sells more glasses and contacts over the Internet than anyone else, and already ranks as one of the 10 largest optical retailers in North America. According to a ranking by Internet Retailer magazine, Coastal is now the largest Canadian-based online retailer when measured by sales.

Yet Coastal has achieved all this while flying largely below the radar. Though it’s been one of the hottest stocks on the TSX since January, up more than 60 per cent, few analysts cover the company. Nor is Coastal a widely recognized name in corporate Canada. The question is, for how long? Not only is Coastal growing fast, but as online giants like Amazon try to become the Walmarts of the Internet, any company that carves a market for itself in the online-consumer sector is a potential takeover target.

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Stimulus vs Austerity 2.0

By Jason Kirby - Thursday, April 28, 2011 at 2:56 PM - 9 Comments

Economic arguments are, by their nature, complex and abstract. Few more so than the question of whether massive government spending helps or hurts the economy. That’s why there’s been so much attention paid to the divergent paths the U.S. and U.K. took after the Great Recession. Under Prime Minister David Cameron the U.K. pursued hard-nosed austerity to tackle the country’s deficits, while the U.S. resisted all such moves and instead opted for more stimulus.  Here we had a massive lab experiment pitting two economic theories against each other, playing out in real time on the world stage. Back in January Maclean’s delved into the battle in our story Which Country is Right.

How’s the experiment going? The results so far are inconclusive. Both sides have claimed some measure of victory. Just as critics predicted, cuts to government spending in the U.K. have kept a lid on economic growth, with GDP stagnant for the past six months. Writing on his New York Times blog economist and arch-Keynesian Paul Krugman has hammered away at the notion that spending cuts would awaken the so-called confidence fairy and lead to an investment boom. But at the same time U.S. economic growth slowed dramatically in the first quarter, despite the continued steroid infusion from fiscal stimulus and the Federal Reserve’s quantitative easing strategy. Worse still, rating agency Standard & Poor’s fired a shot across the bow when it downgraded the outlook for Uncle Sam’s debt from stable to negative for the first time in 70 years.

The experiment continues.

In the meantime, EconStories is back with Round 2 of their video battle between economists John Maynard Keynes and F. A. Hayek. In their first video, Fear the Boom and Bust, the two rap battle over their economic theories. Now they’ve been summoned from history again to appear before a Congressional committee. Watch and learn…

Berkshire comes clean on Sokolgate

By Jason Kirby - Wednesday, April 27, 2011 at 6:37 PM - 1 Comment

Warren Buffett got a lot of things seriously wrong about the David Sokol-insider trading affair, starting with this: When Buffett announced the resignation of Sokol, one of his top-lieutenants, amid questionable stock trades, he declared it would be his last comments on the matter. Turns out, not so much.

Berkshire Hathaway’s Audit Committee authorized Buffett to release an in-depth report today which states in no uncertain terms that Sokol breached the company’s insider trading policies. (See our original story, Say It Ain’t So, Warren, for background.)

From the report:

His purchases of Lubrizol shares while serving as a representative of Berkshire Hathaway in connection with a possible business combination with Lubrizol violated company policies, includingBerkshire Hathaway’s Code of Business Conduct and Ethics and its Insider Trading Policies and Procedures. … By engaging in such questionable conduct, Mr. Sokol threatened Berkshire Hathaway’s reputation–or would have done so had he remained with the Company.

Given the huge uproar over Sokol’s actions, this report is an important first step to repairing the damage to Berkshire’s cherished reputation. The question is, will it be enough? The release comes just three days before Berkshire’s annual general meeting in Omaha, Nebraska, and a lot will depend on how Buffett handles the matter there. The key being whether he apologizes. While it was Sokol who placed the trades and kept information from his boss, Buffett trusted him and did not probe deeper into the matter. And as chairman and CEO of Berkshire Hathaway, Buffett is ultimately responsible for any actions by his employees that damage the company’s reputation. Buffett has a long history of saying sorry, but this could be the most important apology of his career.

Anyway, on to the report. There’s a lot that’s fascinating in the plainly-worded disclosure:

-Berkshire is contemplating legal action against Sokol “to recover any damage the Company has sustained, or his trading profits, or both.” The company says will also cooperate with any government investigation into the matter, though it doesn’t come out and say that there is an investigation.

-Last October investment bankers at Citi brought a list of 18 chemical companies to Sokol as possible takeover targets. It was Sokol who narrowed the list down to one name, Lubrizol. That was two months before Sokol made his first purchase of Lubrizol shares.

-On March 14, after Berkshire announced the takeover of Lubrizol, a banker from Citi congratulated Buffett on the deal and took credit for bringing it to Berkshire’s attention. Until then Buffett had just assumed that Sokol had owned his shares in the company for some time and thought it was a great company Berkshire could buy. Suddenly, on the day of the big announcement, Buffett gets sideswiped by the revelation the deal had been cooked up by investment bankers. One can only imagine what was going throug his head at that point.

-The statement Buffett issued at the end of March announcing Sokol’s resignation was absent a passage Sokol had objected to, but which makes it clear Buffett knew Sokol’s actions stunk to high heaven.

Mr. Buffett deleted from the release the one passage Mr. Sokol said was inaccurate: a passage that implied that Mr. Sokol had resigned because he must have known the Lubrizol trades would likely hurt his chances of being Mr. Buffett’s successor. Mr. Sokol told Mr. Buffett that he had not hoped to be Mr. Buffett’s successor, and was resigning for reasons unrelated to those trades.

-The Audit committee all but calls Sokol a liar. It notes that Sokol “left unchanged” key points in the draft version of Buffett’s statement about his resignation that were untrue. The final version of the statement said Sokol ”did not know what Lubrizol’s reaction would be” when in fact he knew full well the company was keen to be acquired by Berkshire.

-The report is also notable for what it doesn’t discuss. After Sokol resigned, he appeared on CNBC. In the interview he said he’d done nothing wrong, and that Charlie Munger, Buffett’s investing partner, had owned shares in Chinese electric car company BYD before Berkshire acquired it at Munger’s suggestion. The Audit committee doesn’t go into this trade at all. Having said that, the circumstance are much different. Munger had owned his shares for a couple of years, fully disclosed his shareholdings to Buffett and was in no way involved in the deal to buy BYD.

BTW, for what it’s worth, I see the latest episode of Warren Buffett’s Secret Millionaire’s Club, an Internet cartoon that aims to teach kids about business and investing, is all about the importance of keeping a good reputation. It’s oh-so-appropriately titled “Cancel My Reputation.”

Energy efficiency rules

By Jason Kirby - Tuesday, April 26, 2011 at 11:00 AM - 0 Comments

Aga Luczakowska/Bloomberg/Getty Images

Procter & Gamble, the consumer products giant behind Tide, Crest toothpaste and Gillette, has told its suppliers to regularly report their energy consumption rates. The thinking is simple: if P&G can drive down its suppliers’ energy costs now, it could enjoy a price advantage over competitors later on if oil prices keep rising.

The program began last year with a survey to P&G’s raw material suppliers and even ad agencies, asking for information on energy consumption and greenhouse gas emissions, according to a story in Fast Company. More than 80 per cent responded, and of them, 94 per cent reported their electricity usage. This year, any company that doesn’t fill in the form won’t be able to do business with P&G.

The company has a big carrot to accompany its sizable stick. Suppliers who lower their energy consumption or offer useful energy efficiency advice get a higher rating, which will translate into a boost in business from P&G.

A dubious debut

By Jason Kirby - Tuesday, April 26, 2011 at 9:20 AM - 3 Comments

Andrew Vaughan/CP

The official launch of Research In Motion’s PlayBook device in New York City, on April 15, didn’t muster the same international media blitz that accompanied the debut of Apple’s iPad a year ago. But the two events shared one thing in common—both sparked a fierce backlash over what the tablet makers failed to include.

As it stands, the PlayBook doesn’t come with email, contacts or calendar programs. Those applications can be accessed by wirelessly bridging the PlayBook to a BlackBerry smartphone, thus extending RIM’s airtight security features. But those without a BlackBerry must use online services, or wait for a promised update later this year. There were also complaints that PlayBook users have access to just 3,000 tailored apps, versus 65,000 for the iPad. The Wall Street Journal tech reviewer Walt Mossberg called the PlayBook “a tablet with a case of codependency,” and said he couldn’t recommend the device to anyone but “folks whose BlackBerrys never leave their sides.”

It didn’t help that just days before the launch, RIM’s co-CEO Mike Lazaridis walked out of an interview with the BBC because he was angry over the reporter’s questions. A Google News search for “Lazaridis and BBC” turned up nearly half as many hits as “Playbook and launch” for the past week.

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Play ball! Soccer, that is.

By Jason Kirby - Wednesday, April 20, 2011 at 3:50 PM - 2 Comments

Michael Probst/AP

Football, footy, soccer—whatever you call it, most Americans still don’t get it. But that hasn’t stopped a few Americans, very wealthy ones, from taking a serious interest in the sport overseas. On April 11, U.S. billionaire Stan Kroenke bought Arsenal, the English soccer team, for US$1.2 billion in cash. Kroenke, who made his fortune in real estate development and then became considerably richer when he married Ann Walton of the Wal-Mart Walton clan, already sat on the team’s board of directors. Now the famed club is part of his growing sports empire, which includes the Denver Nuggets of the NBA and the NHL Colorado Avalanche. The deal came just days after basketball star LeBron James took a minority stake in the soccer club Liverpool. Last year, Fenway Sports Group, a company controlled by Florida hedge-fund manager John Henry and Hollywood producer Tom Werner, paid US$488 million to buy the club.

Say it ain’t so, Warren

By Jason Kirby - Tuesday, April 19, 2011 at 9:10 AM - 3 Comments

When 40,000 Berkshire Hathaway shareholders descend on Omaha, Neb., for the company’s annual meeting later this month, they can expect an awkward moment early on. Each year, Berkshire’s grandfatherly CEO Warren Buffett kicks off the event with a video montage of comedy skits and advertisements for his many subsidiaries, such as Dairy Queen and Geico insurance. And every year the movie features a classic newsreel from two decades ago, when Buffett went before Congress with a principled message for his employees: “Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.” Until a few weeks ago that was just one of many folksy aphorisms Buffett is famous for. But if the clip rolls on April 30, and the Buffett of 1991 utters those words, all eyes will be on the Buffett of 2011, who just sat by while one of his most high-profile employees put Berkshire’s reputation through an industrial shredder.

An uproar over questionable stock purchases by former senior executive David Sokol has put the world’s most famous investor on the hot seat like never before. Buffett has endured intense criticism from lawyers and financial columnists, while Wall Street types everywhere have suddenly discovered their moral outrage and gone on the attack. He’s been called a con man, a hypocrite and, perhaps most biting of all, “very unBuffett-like.” In short, the incident has sparked a wholesale reassessment of the Creamsicle-loving, ukulele-strumming billionaire. The cult of Buffett is in turmoil.

The question now is whether the crisis will leave any lasting damage. It’s hard to imagine those investors in Omaha, who Buffett has made exceedingly wealthy, ever giving up the faith. And there’s more than a little envy and resentfulness behind many of the attacks on his character.

But the fact is, Buffett is not just another billionaire with a keen eye for cheap companies. For people on Main Street America who understand the importance of the stock market but deplore the greed and dirty tricks associated with it, Buffett was the guy in the modest corner office they wished all CEOs could be. And now they’re left to wonder whether he’s really all that different. “People have elevated Warren Buffett into the god of value investing,” says Vitaliy Katsenelson, chief investment officer in Colorado’s Investment Management Associates. “Now we’ve found out that the god is not perfect.”

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Econowatch: April 2011

By Jason Kirby - Thursday, April 14, 2011 at 10:35 AM - 5 Comments

If you tried to count the worries investors face today, you’d soon run out of fingers and toes. We’ve seen rising inflation, unrest across the oil-rich Arab world, a U.S. fiscal crisis and sovereign debt woes in Europe, any one of which might have kneecapped a lesser bull market. Not this one. Two years into the strongest rally ever, not even the prospect of nuclear fallout and the collapse of the world’s third-largest economy is cause for concern.

There are basically two ways to view what’s going on right now. One is that a fundamental disconnect has occurred between market sentiment and reality. In this scenario, investors have affixed blinders to obscure all that ails the economy. In other words, the markets are driven by momentum. When that momentum stalls, look out below.

The other possibility is that all these fears are overblown. Investors have learned from the stock market rout and correction of 2009 not to lose their heads at the first (or even umpteenth) sign of trouble. Instead, some argue there are real reasons to be optimistic: corporate profits are robust, manufacturing is on the upswing and gains in the U.S. job market are picking up speed.

The ultimate test of which scenario is behind the rally will come this year. Central banks are expected to tighten their monetary policies. Interest rates will rise and the virtual printing presses that created trillions of dollars in new money will shut down. With the end of easy money, investors will inevitably become more attuned to risk. Meanwhile, an important crutch that has helped prop up the recovery so far will be gone. If we’re fortunate, both markets and the economy will remain resilient. If not, we’ll look back and wonder why investors ignored so many obvious signs of trouble.

By the numbers

11 The percentage of homes in the U.S. now sitting vacant. In many vacation areas across the country, hit particularly hard by the downturn, vacancy rates are over 60 per cent.

50 The number of years of oil supply that may be left in the world, given current supplies and demand, notes a senior economist with HSBC.

428 The number of KFC, Pizza Hut and Taco Bell franchises in Canada owned by Prizm Income Fund, which has filed for court protection from creditors.

106,000 The number of high-tech jobs that will need to be filled in Canada in the next five years as the dot-com boom returns, notes an industry report.

$4.9 billion The amount U.S. hedge fund manager John Paulson earned in 2010 after betting big on the economic recovery.

Signs of the times: conspicuous consumers

*The U.S. housing market may be in brutal shape, but billionaire Russian investor Yuri Milner just plunked down US$100 million for a California mansion. Milner is an investor in Facebook, Groupon and game-maker Zynga. A sign of life in the housing sector, or just another oligarch with too much money to burn?

*Saks Fifth Avenue had to limit customers to six one-ounce packages of La Prairie’s latest skin care product. The price: $500 each. American consumers, it seems, are flooding back into the US$2.7-billion “prestige” skin care market. No sense looking like you just weathered a Great Recession.

*Subprime mortgage bonds—three words that would have sent investors screaming until recently—have been making a comeback. The bonds, which are backed by thousands of poor quality mortgages, have doubled in value to 60 cents on the dollar since early 2009, as investors have rediscovered their appetite for risk.

*President Barack Obama, an admitted “crackberry” addict, has been a boon to Research In Motion’s marketing campaign. But Obama told reporters he now has an iPad, too. Is that a bad omen as RIM readies to launch its PlayBook tablet?

Reward miles for charity

By Jason Kirby - Thursday, April 14, 2011 at 10:17 AM - 1 Comment

Japanease Red Cross/Getty Images

Spurred by images of devastation in Japan, donations to charities like the Red Cross are soaring. To make it even easier to give, many companies with loyalty programs are now letting members donate their points to relief efforts. Just last week, Shoppers Drug Mart launched a one-month campaign encouraging customers to donate their Optimum points to the Red Cross, which it will match with cash donations up to $150,000. But while charitable giving is certainly a good thing and is to be encouraged, not all points-for-charity programs are the same, and it’s important to read the fine print before deciding if this is the best way to help out.

Canada’s largest loyalty program, Aeroplan, was one of the first to make such an offer available. It set up a special Aeroplan Miles account for the Red Cross, and kicked things off by donating one million “miles.” Since then, members have donated an additional 440,000 miles to the account, according to Isabelle Troitzky, communications director at Groupe Aeroplan. The Red Cross can redeem the miles to pay for flights or buy merchandise like computers through the Aeroplan website.

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Harper still far from majority: poll

By Jason Kirby - Tuesday, April 12, 2011 at 9:22 PM - 160 Comments

Despite some high profile gaffes and billions in new spending promises, after two weeks on the campaign trail, the main parties barely budged in the minds of Canadian voters, according to a survey done for Maclean’s and 680 News.

When asked which party people would vote for if there were an election today, 39 per cent of respondents on Innovative Research Group’s Canada 20/20 panel picked the Conservatives, virtually unchanged from 39.1 per cent after the first week of the campaign. The Liberals move up, but only slightly, to 28 per cent, from 27.5 per cent, while the NDP was flat at around 17 per cent. Continue…

An ugly acquisition

By Jason Kirby - Thursday, April 7, 2011 at 9:36 AM - 6 Comments

Darryl Dyck/CP

When Bank of Montreal offered US$5.8 billion to buy Wisconsin bank Marshall & Ilsley (M&I) last December, it was seen as another bold move by a Canadian bank pushing into the U.S. market. Now BMO finds itself embroiled in the standoff between Wisconsin Gov. Scott Walker and the state’s unionized workers, and the unions have set their sights squarely on BMO’s latest acquisition.

Walker’s high-profile effort to strip public sector unions of bargaining rights sparked protests and riots in Madison last month. But having failed to deter the governor from his crusade, unions are now going after his biggest financial backers. Last year, M&I’s executives gave roughly US$46,000 to Walker’s campaign. The unions have warned that if M&I does not denounce Walker’s policies, they’ll yank their funds from the bank. A grassroots “Move Your Money Campaign” is under way. Earlier this month there were reports several firefighters withdrew their savings, around $200,000, from the bank. According to The Nation magazine, unions have roughly US$1 billion tied up in M&I.

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Google hopes you "like" +1

By Jason Kirby - Wednesday, March 30, 2011 at 9:14 PM - 7 Comments

Google has unveiled its latest effort to muscle into the social networking sphere. Google +1 is the company’s answer to Facebook’s Thumbs-up “Like” button. The +1 will show up next to search results and eventually on pages all over the Web, and when you click on it, your recommendation will be registered. Likewise, the search results and ads you see will tell you who among your contacts has vouched for them. Here’s a video explaining it.

As many have pointed out, this is just another in a long line of attempts by Google to be more social, with most of them falling flat. How can it be that a company that only a few years ago looked like it was going to take over the world has failed so miserably at making friends? Continue…