Nortel Board thinks we are still in the dotcom boom times

With layoffs and pension losses, the Nortel Board should be managing the optics of bonus payments to top executives. This is not the dot com boom. We are in a new era where we are haemorrhaging jobs to countries where smart, educated people work hard for far less.

Nortel should have got the bail out not GM because it is new technology while GM is old technology.

Are these Nortel executives so talented? Well, yes, turnaround people are a rare breed so there is probably (hopefully) some truth there. I do wonder if the Nortel Board members have picked up the latest in compensation package trends. Roger Martin, University of Toronto, is saying bonuses should be tied to performance measures like customer satisfaction measures, not to increasing the share price.

How you pay people makes them mercenaries or patriots. Nortel executive is looking rather mercenary.

Would you pony up cash for a ski resort in a desert?

What does the billions of dollars bust of Dubai mean for North Americans? First of all, it is a reminder that our global economy is still fragile and interlinked. Secondly, it is the British banks who were one of the main lenders to the troubled, slowly deflating, glittering and formerly fabulous Dubai. So North America will be relatively unscathed.

Finally, for North American business, a strong message is to get back to basics where you know your clients.

The important question to ask is who is the customer? British banks made assumptions that the Dubai sheiks had oil, that the price of oil would continue to climb and so sure, they would be good to pay back the loans. These bankers did not do sufficient risk analysis.

The other critical question to ask is use of proceeds. Did these bankers ask, “What are you going to use the loan for?”

"Hmmm...let me see, you are going to build a ski resort in the middle of the dessert? How good will the pay back be for that expensive project?”

A little bit of market research would have helped. If a ski resort in a hot place was such a good idea, I’m sure Vegas would have done it already.

I also recommend the last question to ask is if you, the loans executive, personally, would make the loan. This is not in the manual. However, by briefly contemplating whether you would give your own money to the project idea does push your thinking to a more sensible place. This artificial question perhaps, but briefly gives an alignment of interests. Perhaps if the loans executives were asked to assign some of their bonus to the loan repayment, it might have saved the British tax payer (who are now the proud owners of said banks) yet more pain.

For North Americans, check your executive compensation packages. Study how these British bankers were being paid for the amount of loans they made. Were they made into mercenaries, more interested in getting paid a bonus than watching for clear signals the loan might not get repaid?

Now the British tax payer is backstopping these defaults, but they do not have a ski resort in the middle of the desert as compensation.

Dubai should not affect Canada too much. Canadian bank stocks have gone up and we have a commodity backed currency.

Is it time to invest in property?

Not a chance, the Canadian Mortgage and Housing Corporation is creating a Fannie Mae, Fannie Mac house disaster. This impending crisis should be front-page news.

Low interest rates and the government Canada Mortgage and Housing Corporation’s (CMHC) dramatic increase in mortgage backstopping for people who put only 5% down is creating a Canadian housing bubble that will echo that horrible popping sound of the USA housing market.

In January, CMHC was allowed to insure up to C$600-billion in mortgages, up from C$450 billion the year before. This was done in the dark days

Making housing affordable is a noble cause for any government or bank, however doing it by allowing for easy lending does not work at all and we see it in the US. All it does is let people borrow more ultimately as we are seeing right now, it is driving house prices skywards. It is a well meaning government program but it is distorting the markets. What it means for any tax paying Canadian is that housing risk is carried by the taxpayer here in Canada.

If you compare average salaries to average house prices it just doesn't add up, especially in bubble cities such as Vancouver. Clerks and baristas buying shoe box condos for over 300K is a disaster waiting to happen. In Vancouver it is going to end particularly badly, whichever way it pans out.

The CMHC has disturbing similarities to Fannie Mae and Freddie Mac which helped set up the US housing bubble. The issues raised were solvency because of the ease of credit, market distortion as well as the fact that CMHC represents an indirect and increasing bailout to Canada’s profitable banks.

In the end, someone ‘always’ has to pay. Otherwise, the result will be similar to the US with increased foreclosures and taxes. That someone is the tax payer. I don't want my children to have to pay for our train wreck. While I do enjoy the company of my sons, I don't want them living with me until they are in their mid-thirties.

The CMHC is a sacred cow and it needs to be barbequed.

Jacoline Loewen, private equity expert, author of Money Magnet, panel of CBC show - Dollar Signs with Dianne Buckner on at 1:30 Saturdays.

The Billionaire List is out again - any surprises?

The billionaires list is out again and any surprises?

When I looked at the Canadians who made the Billionaires list, I was blown away by how many self-made entrepreneurs made the list. You know they had start-up ventures, went out begging for money, took big risks and had sleepless nights.

Many people think billionaires are tainted and got their money through corrupt means but in Canada you can see that is just not true. The billionaires are Canadian entrepreneurs who figured out how to take their product outside of Canada to the world.

The Canadian Billionaires are so accessible too. It is remarkable that I have met so many of them in person, they were not surrounded by an entourage seen in other countries; and it’s not because I am some big wig. Far from it!

Jimmie Patterson started as a bell hop at a hotel and says that is what taught him how to do business and who mentors young business people whenever he can.

There’s Guy Laliberte who bankrolled Cirque du Soleil by walking across Quebec on stilts eating fire and asking people to invest in him. He’s now keeping Vegas going.

Gerry Shwartz, a highly thought of private equity leader who acts with great integrity, growing companies with a positive spirit. He’s no Donald Trump or Goldman Sachs type.

Michael Lee-Chin, classic entrepreneur story from Jamaica and he is donated $30M to ROM demonstrating responsibility to the community.

Jim Balsillie of RIM and the Blackberry, was the Angel investor who stayed. He and Mike are creating an Ontario technology powerhouse with their work with universities and start-ups. Jim gives his time to talk at conferences for start-ups and the early stage market. He coaches young entrepreneurs too. I remember seeing him at a conference where he was urging young entrepreneurs to get up and ask him questions, to be more pushy. He also gave me time for a book I was writing on technology.

There’s Jeff Skoll, of e-Bay, creating an out of the box Internet service which started with him just trying to be helpful to his girlfriend.

It is all achievable for every Canadian. You don’t need connections. You don’t need to be corrupt. You do not need to be born into the right family. You do not a costly university degree.

It also shows Canadians taking their brand to the world – eBay, Cirque du Soleil, Rim. Every Canadian entrepreneur should be excited and inspired by this list.

Canadian Billionaires

The Thomson family (The Thomson Corporation) $24.41 billion[1]

Galen G. Weston, George Weston, W. Garfield Weston (food/fashion) $7.7 billion [2]

Arthur Irving, James Irving, John Irving (natural resources) $5.45 billion[3]

Jim Balsillie (Research in Motion) $5.6 billion[4]

Edward Samuel Rogers, Rogers Communications Inc $4.54 billion (Deceased December 2, 2008) [3]

Paul Desmarais and family (Power Corporation of Canada) $4.41 billion[3]

James (Jimmy) Pattison (founder of Jim Pattison Group) $4.17 billion[3]

Jeffrey Skoll (eBay) $3.93 billion[3]

Mike Lazaridis (Research in Motion) $3.6 billion[4]

Saputo Family (Saputo Inc.), Montreal: $2.78 billion[3]

Michael Lee-Chin (AIC Group) $2.6 billion[3]

Bernard Sherman (Apotex Group of Cos.) $3.23 billion[3]

David Azrieli $2.44 billion[3]

Fred and Ron Mannix $2.38 billion[3]

Daryl Katz (Rexall Pharmacies / Edmonton Oilers) $2.37 billion

Gerald Schwartz (Onex Corp) $1.57 billion[3]

Guy Laliberté (Cirque du Soleil) $1.5 billion

Jacoline Loewen, private equity expert, author of Money Magnet, panel of CBC show - Dollar Signs with Dianne Buckner on at 1:30 Saturdays.

Horror movie

This little video is actually frightening to watch. It is the unemployment trends of America as the recession takes hold. Interesting how the center of the country is impacted less - is that because of population or types of jobs?

link to video: http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

Jacoline Loewen, private equity expert, author of Money Magnet, panel of CBC show - Dollar Signs with Dianne Buckner on at 1:30 Saturdays.