Key takeaways from Turmoil

I haven’t written much lately, and that’s been for a variety of reasons. The most important being that I had to ensure clients capital was sheltered from what seems like Tsunami’s of bad news. Not much changing to do, just some re-balancing into less risky investments and continuing to hold our oldies but goodies.

Some of my observations or takeaways over the last few months:

  1. Don’t panic, analyze
  2. Ensure you always have enough cash on hand in case of an emergency (worst case scenario)
  3. Make sure you have adequate Insurance on all hard assets, including your lives
  4. Believe in your ability and instincts
  5. Never rely on others to help you out financially
  6. Never assume someone in authority is smarter than you are
  7. Question what seems too good to be true
  8. You always get what your pay for.
  9. Consistency always pays off
  10. Take care of yourself and your health (mentally and physically)

Stay sharp, stay committed and stay focused

Rick

 

 

Leading a Horse to Water

It’s a classic saying, yet never more appropriate than when it’s applied to professional advisors in any field. Be it medical, legal, counselling or financial. All professions that deal with the public can relate to this expression. In the beginning I used to cringe when good advice fell on deaf ears. But as I matured and raised a family, I learned to let things play out.

Failure is good. We forget about that. I’ll borrow a line from Batman and use these lines as a great reference;

“Why do we fall down Master Bruce?” “So we learn how to get back up Alfred”.

Our culture and especially our families have become too protective over failure, to the point of stifling effort. In sports the score does matter. It provides a clear indication of ones reward or effort and also spurs reflection and drive for those on the wrong end of the scorecard.  Life is similar. It owes you nothing. Sooner or later you will learn its harsh realities. The longer you prolong or protect individuals from these lessons, the harder it will be for them to learn from them.

Parents, Teachers, Counsellors, Lawyers, Doctors and yes Accountants, are all there to help us make good decisions. As professionals, we must also understand that not taking our advice is also sometimes necessary for the greater good. I know I have learned the hard way several times, and wish I had just listened the first time. I also know that these consequences made me who and what I am today.

Rick Barbosa

 

Bombardier-A an example of why welfare does not work

This is a family run company who’s only raison d’etre is to make themselves wealthier, and provide votes for Quebec friendly politicians. All this is at the expense of the Dumb Canadian Taxpayer. Yes I say dumb because no one ever really cares until it affects them personally.

When something is given to you without you earning it, do you really value it? It’s like finding a $20 bill on the sidewalk. Do rush to the bank to save it , do you use it to pay a bill or do you spend it right away?

We as a country and Quebec as a Province have poured billions into a company that does not care about those outside its class A structure. If it did, it would have made profits and been profitable at any cost. Instead, they know that they will be propped up by different levels of government in the name of saving Canadian Jobs. If you did the math, we could have funded a national drug program or a national daycare program with all the lost funds poured into Bombardier.

Now, because there were no strings attached with our money, they went looking for another Sugar Daddy in Airbus. Airbus is a shrewd company who paid nothing for the deal and got all the Intellectual Property that we as Canadians paid for.

Welfare is something for nothing. You (and we as a Country) get what you pay for. Remember this next time you’re at the voting booth.

Rick Barbosa

 

BBT Financial Update 10 days ahead of Barclays Analyst

Our clients enjoyed a 10 day window to buy up depressed stocks from our client update on May 12th. See the Barclays post below:

BUZZ-Barclays upgrades 5 Canadian banks on valuation, outlook

23 May 2017 – Reuters

BUZZ-Barclays upgrades 5 Canadian banks on valuation, outlook** Barclays raised its outlook on 5 Canadian banks due to low valuations following Q1 results

** Analyst John Aiken writes depressed valuation also attributable to housing market worries arising from non-bank lender Home Capital Group’s rapid decline in deposit accounts
** Cites upcoming switch to 2018 valuation year as painting rosier earnings growth outlook
** Among ‘big 6,’ raises Bank of Montreal to equal weight from under weight, PT to $98 from $95
** Lifts Bank of Nova Scotia to overweight from equal weight, PT to $84 from $78
** Upgrades National Bank of Canada to overweight from equal weight, PT unchanged at $59
** Boosts TD Bank Group to equal weight from under weight, PT to $69 from $64
** Also raises regional bank Laurentian to equal weight from under weight, though trims PT to $58 from $59
** In last 12 months, banks have outperformed the broader Canadian equities market, with the Thomson Reuters Canada Banks Index up 14.9 pct vs. the TSX Composite (up 11.1 pct)

Even with the BMO earnings today,  we see a buying opportunity.

Our Call 05/24/17
We predict that enough republicans will vote for impeachment before US Thanksgiving, leading to further depressed values for banks in the US. Canadian Banks should see continued strength as safe havens. Oil will bounce higher despite incremental supply. Overall infrastructure spending will boost oil demand over the next 2 years so hold on or add to your energy stocks.

Rick Barbosa

 

Trust and Competency

Companies and Individuals that exude both trust and competency in their work are increasingly hard to find.

A few recent examples:

Samsung

  • Leadership charged with collusion
  • Produces sub-standard home appliances
  • Revealed only recently that “Smart TV’s” are prone to hacking and can be used to record behaviour

City of Toronto

  • Road maintenance contracts awarded to “select” firms who are then sub-contracting to lower bidders

Province of Ontario

  • Contractors using sub-standard asphalt to win the bid, only to keep repaving because of the poor quality
  • Ontario Power Generation/Ontario Hydro-Ridiculous solar re-purchase agreements for residential producers that lead to super high hydro rates

I could go on but would rather focus on why this continues to happen. When we accept sub-standard and poor performance as the new “Norm” we endanger the very existence of our institutions and companies. Dealing with poor performance adds costs and inefficiencies. We must go back to demanding more from our workers, management and governments to live up to what is expected of them.

Holding people, managers and representatives to account is not easy, nor HR friendly, but it must be something we are prepared to do. Accepting sub-par performance will mean that people will go elsewhere or lose faith entirely. Both scenarios are not good, but losing someone’s trust can be devastating.

If you are not happy with your product, service or government representative, make it known that you demand better. Hold them to account, vote, or find someone that you can trust and is competent.

Remember

Are you with me?

Regards,

Rick Barbosa

 

 

 

Actions speak louder than words???

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It’s an old saying, and one that is meant to have us think twice before making a rush to judgement. Unfortunately, today with so much talk and social media, it’s hard to drill down and measure someone by what they actually do.

At BBT Financial we are not perfect, nor ever will be. When we get something wrong, like a tax assessment we immediately relay this to the client and tell them where we went wrong. We show them our calculations or where the CRA had a different opinion. We then adjust our process to correct future calculations and ensure it never comes up again. Mistakes are the best teacher. Honesty goes hand in hand with Accountability.

We believe we owe it to the client to be as transparent as possible. If they choose to go elsewhere, we never stop them.  Trust is our business, and our clients deserve the truth as a measure of that trust.

 

Rick Barbosa

Bombardier and Yahoo: A Tale of Two Losers

Last week we were informed of another billion user hack at Yahoo. Not sure of the circumstances as to why now, but my best guess is that they uncovered it while still in Verizon’s due diligence investigation. The sheer stupidity that must have been covered up as to why there were 2 breaches years apart, and the failure to learn from their mistakes in preventing the second is beyond belief. Here we have a large multinational in the tech space, not able to come up with a tech solution to this centuries most pressing issue, security, is mind boggling.

How does this happen? It comes down to having the wrong people employed in the wrong positions. The culture of “just go along” is rampant in larger companies, and as soon as someone questions the mentality of the herd they are ostracized and HR’d (human resourced) to the curb…  Until we have senior managers who are held criminally responsible for their actions things will never change. The side-effects are lost jobs, lost credibility and increased pressure on an already fragile working class and social services.

Bombardier is another prime example of a company that should have gone bankrupt decades ago. By artificially propping up a failed business you are saying it’s ok to keep failing, and that there are no consequences to your actions. It’s like saying to a criminal, we know you stole our money but we’re going to give you more just so you don’t have to break in next time.

The City of Toronto got what was coming to it for going with a poor company to begin with. We cause ourselves more harm by doing what seems to be the right thing instead of taking our medicine and getting better the old-fashioned way.  Like the Buckley’s commercial says ” it tastes awful, but it works”

We need to take some strong medicine and get better soon as a country, or we’ll be the poor northern neighbour again waiting for scraps to fall from the table to nourish our economy. We need to lead and not follow. Plain and simple.

Real leadership and management takes courage. It’s not easy, but nothing ever worthwhile is.

Rick Barbosa

 

 

 

Playing by the Rules

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Whatever your Politics, you cannot argue with the recent market uptick and how it’s been impacted by pre-emptive policy choices of the new U.S Administration. In my recent posts you will have read that Free Trade and Trade Agreements in general only work if the playing field is level. The playing field is not level, and Large Multi-Nationals like it that way. We have systematically exported our manufacturing expertise to nations that are not democratic and do not see raising the standard of living as a priority. Product quality, safety, pollution and labour practices have all suffered as a result of non-level playing fields.

North American companies can compete with any company in the world on a level playing field. Our access to talent and innovation, capital, and natural resources is beyond compare. The standard of living we all share in the developed world was the result of investments made by both private and public sources, for the long-term prosperity of our companies and countries.

The current administration is disrupting the status quo. By refocusing and rebuilding North American industries we are saying that it’s time we focus on ourselves and our standard of living. The message is simple and effective. We must put our country, its industries and it’s people first or we risk our very way of life.

Play fair or don’t play at all.

Regards,

Rick  Barbosa

 

 

Has “Free Trade” really helped us?

In my humble opinion NO.

Here is what I used to base my answer on. When we lowered tariffs in North America it was meant to encourage a freer flow of goods between nations. Economists tell us that increasing trade creates wealth and was essential to grow economies on both sides of the border or for that sake internationally (TPP, CETA). Free or tariff reduced trade is only a recent trend so we must look at why we had tariffs in the first place.

Tariffs or “taxes” were meant to protect our local and mature markets that were the envy of the world. Our Markets (Canada/US) harbored a healthy working population with disposable income and a robust manufacturing sector. Unlike other parts of the world North America (Canada/US) had made investments for the betterment of it’s population that included:

  • Health and Safety
  • Organized Labor
  • Minimum wage
  • Social Security/Government pensions
  • Workplace or Self-Directed retirement plans
  • Workers Compensation
  • Employment standards Legislation
  • Environmental Protection

Anyway you cut it, these programs increased our cost of production, albeit while producing a higher standard of living. The Tariffs made cheaper goods that were made in countries or states that did not have any of these obligations competitive by increasing their landed cost. In most cases local was cheaper when you factored in tariffs. This drove investment in both countries by companies who wanted to serve these rich markets by making it cost effective to produce locally.

We were told that lowering tariffs would drive competition and innovation because we would be allowed access to their markets on an equal footing in exchange for access into our markets. That did not happen. Restricted or limited access is what we got.

Too often national or state interests fell outside of NAFTA like Health and Safety, minimum wage, and environmental standards. So what in essence happened is that for companies to survive the onslaught of cheaper goods they too had to go offshore to remain competitive. In fact the standard of living has not increased in Mexico, the U.S and Canada. All the wealth that has been created did not raise the standard of living in any developed country, instead it only boosted the multi-national corporations bottom lines. This came at the expense of blue-collar and lower level white collar workers.

I am a strong proponent of responsible capitalism and competition. It’s the best system period and one that drives growth and innovation. When Free Trade was introduced and as other European and Pacific agreements pop up we must ask ourselves one fundamental question:

Is the playing field really level on  both sides?

Rick Barbosa

Albert

 

The cost of drinking the Kool-Aid

Kool-Aid

Now with tax season winding down, I finally have some time to reflect and write about recent events and provide my spin on these.

In any corporate environment we all know of those individuals who have attained their positions either by

  1. Selectively being drafted from upper management for their sympathetic views
  2. Taking shortcuts to achieve short-term results, neglecting long-term consequences

The first type of promotion is what’s known as Empire Building. This comes about when senior management wants individuals around them willing to “go along” with their direction and corporate outlook on how to best serve the interests of the company. Interests of the company in Empire Building more often than not will miraculously coincide with Senior Management’s own self interests. These interests can take the form of Bonus’, Stock Options, Board Positions, Fringe Benefits and Gold Plated Pensions. The least amount of resistance that they can have while attaining these interests the better.

The second type closely mirrors the first, but is distinguished only by the individualistic approach to the end result. WIIFM (what’s in it for me) Managers see employees and subordinates as tools and assets to employ in attaining the quickest, most cost effective, and most personally rewarding path to success. They often do not take into account longer term issues such as quality, impact on brand, societal impact and human cost of their decisions.

Many out there would see nothing wrong with either approach and tout that it is often necessary to employ these tactics to achieve the results the market expects. “Market Expectations” is another name for a Giant pitcher of Kool-Aid. Once we drink from the Kool-Aid pitcher as an organization we start to rationalize the decisions we make to make the market happy. Trouble is, this can’t and won’t last forever. What’s often left in the wake of pandering to the market and drinking the Kool-Aid, is broken trust, lost resources and damaged lives.

As owners and managers, we have a fiduciary and moral duty to think long-term on how to best achieve sustainable and realistic results that elevate our companies and staff as a whole. It’s not a 100-yard dash, it’s a marathon. Play to finish.

Some recent examples of “Kool-Aid” corporations:

Volkswagen takes $18 billion hit over emissions scandal Friday, April 22, 2016 02:03 PM EDT Toronto Sun

Mitsubishi Motors mileage scandal widens, U.S. regulator seeks information TOKYO 
— Reuters

General Motors will pay $900 million to settle criminal charges related to its flawed ignition switch that has been tied to at least 124 deaths. CNN Money

Till next time.

Rick Barbosa