Dr J. and Mr. K. Blog - Politics, Powder and Profit

As MrK and I are both on holidays until July 23rd, and I can't guarantee either of us will be diligent enough to blog on the road, please be warned that you may see nothing new for the next week or so. If relaxation and endless road miles are insufficient for us, perhaps you will see something. So please look in just in case...

July 16, 2008

Rusting boxes

Remember the paperless office? Well remember is the wrong word because, of course, it never happened. Twenty-plus years ago, when office memos were still delivered by people called “secretaries”, there was much talk about the brave new tomorrow – one where all transactions would be done electronically and massive tracts of virgin forest would remain uncut.

I guess it sort-of happened. A judicious number of paper memos, transcribed by the aforementioned vanished guild of “secretaries”: have pretty much gone. These have been replaced by the deluge of electronic notes that we’re all drowning under.

Then came the cheap, high volume printer. E-mails and any other documents can be printed off in an instant for review, drafts re-printed numerous times due to tiny errors. Wite-out has become another cultural anachronism.

In offices, like resource companies - where big, hi-tech colour printers are common – huge maps are printed, and printed, and re-printed; again because there might be a small error in one part of the lower right side of a given map or cross-section. The result is literally piles and piles of crumpled plots on high-resolution paper looking like so many sheets of discarded wallpaper.

Back in the day, these maps were typically hand-drafted, either by the professional himself, or by wizened old draughtsmen. These typically had calloused hands, stained by ink and tobacco juice, and looked like they’d been transported out of some lost Dickensian world.

Which brings us to the rusting boxes. With all the paper squandering going on behind closed doors, you’d think that the very public display of paper wasting would upset some people. Not if the corner of Laurier and Metcalfe in Ottawa is any indication.

There, blocking much of the broad sidewalk, are no fewer than 14 metal newspaper boxes. Fourteen. Yes, there are the two commercial dailies, the Sun and the Citizen, along with the give-away “Sun-killers” “24” and “Metro”. The Epoch Times is cheek by jowl with the Ottawa Business Journal.

Then there’s the forest of “service-oriented” pulp: Homes & Land, Real Estate Book, something called HUB Digital Living, Technology Magazine and Ottawa HR (sensibly in the same box). Something called the “Big Yellow Box” contains no less than four publications, Automart, New Homes, Employment News and Renters’ News. And, yes, it is big and yellow.

Last but not least is the “lifestyle” stuff. The G&L Capital Xtra, recently featuring a cover on “pansexualism”. No surprise there. (X)press seems to be some kind of entertainment rag, while the nearby Exclaim modestly dubs itself “Canada’s Music Authority”. It features relevant articles like “Russian ravers blinded by lasers”. This presumably describes the risks of partying with surplus Cold War armaments.

So that’s one corner. Elsewhere downtown you’ll also see equally ugly, rusting boxes containing the Globe and Mail, the National Post; and those peculiar capital creatures The Hill Times and Embassy.

Another tall box, this one white, brags that the six (!) mags inside are all free. But for what? Free insulation for the homeless during the winter I guess. A different corner has a pile of these boxes right next to a huge re-cycling bin – the inevitable destination of most of the contents of most of the boxes.

All this paper just strikes me as odd. Can’t people go on-line? Where are all the protests from the eco-types about all the dead trees? Most cities have these, some even have more “lifestyle” rags aimed at precisely the people who can’t stand waste of any kind.

Presumably putting out the rusted boxes pays, for someone somewhere. Just surprised no one has had them banned yet. Maybe we can unofficially call them endangered?

July 14, 2008

Three times trashy

An alert reader, H.S. from Chilliwack, B.C., sent some interesting observations of waste disposal developments there. I paraphrase:

"We had garbage service by civic employees. Then we went to a system where each household contracted with any company they wanted to collect their garbage. This resulted in a lot of garbage left beside roads, in empty lots, etc., because there are people who do not want to pay. We also had recycling bins scattered throughout the city for paper, bottles, and cans.

Eventually we went a system of centralized garbage pickup. The city chose a commercial collector and all homes (now) have weekly pick up. Costs are levied by the city on each home in addition to normal taxes. We can opt (to) pay for yard waste."

"Since the change, there is a lot less roadside garbage and the recycling bins have been removed. The weekly pick up takes all the recycling material you have, there is no limit. The garbage is limited to one can a week and you can purchase additional cans.

These comments show there are obviously different alternatives worth trying - and false attempts of well-meaning communities that simply don't work out. Compared to the Calgary experience (up to now) of the big re-cycling bins, where you (I) procrastinate and haul tons of stuff a few times a year, getting re-cycling removed frequently with regular waste sounds awfully attractive.

Perhaps it's too much to hope that the waste disposal "professionals" will arrive at the right methods. Besides, city folk are essentially captive to the system imposed on them. By contrast, I see the temptation for rural folks to "burn or bury" as being very high. Make the process too onerous and the "bag-tags" won't ever be used.

July 11, 2008

More trash talk

I thought my trash talk from Wednesday was just another hollow rant, reverberating in the lonely echo chamber that is drjandmrk.com. And then I saw Thursday’s Ottawa Sun.

Guess what? Not only is garbage bag-tagging alive and well, but - surprise! - more and more Ontario communities are using it. Furthermore, places like Kemptville are charging $1.50 per bag picked up at the curb, and I can almost understand this given they are providing the service of picking trash up from your house.

Philosophically, I'm all for user-pay alternatives. In this case however, there seems to be the dual intent of cost recovery plus an attempt to encourage taxpayers to reduce how much they throw out. That will only go so far.

As I write I can see the Government of Canada's attempt to do the same thing. Every office here has a paper recycle can the size of a normal trash can. Tacked on the side is a small plastic container, the size of a small loaf of rye bread, or two small square pumpernickels. That small container is supposed to hold all non-paper trash. The idea seems to be that the small size of the container will cause us to make less garbage.

Alternatively one could simply compress more garbage into a smaller space. However, the progressive folk of Kemptville and elsewhere likely have, or will have, a weight limit to their bags - especially if they have unionized staff. So if you're in my office, or paying by the bag in Kemptville, compacting will not help too much.

But let’s get back to the apparent objectives of cost recovery and waste reduction. On the second, is $1 or $1.50 a bag really enough of an incentive (deterrent) to get people to recycle, or somehow reduce? I suppose it might “raise awareness”; but being charged curb-side for pick-up is one thing – you see the hit immediately - paying once a year for bag-tags, or having the cost hidden in your taxes is another.

Then we have “cost-recovery”. If we assume about 300,000 households in a city of 1 million like Calgary, all producing about 2 bags of garbage a week; multiply that by $1 or $1.50 per bag; you get between $30 and $45MM of revenue. Even little Kemptville, with about 1200 households, stands to reap almost $200,000 from its bag charges. Call me cynical, but I would guess that, if a bag-tag charge were implemented, it would be on top of whatever taxes are currently used for waste disposal.

So, tart it up however you want, “incentive to recycle”, “waste reduction”, simple green initiative, whatever. What the bag-charges amount to is another tax grab. Big surprise.

July 9, 2008

No dumping

I have no memory for jokes, long involved stories with a sharp punch line at the end. That said, I couldn’t help thinking last week of one schoolyard joke, vintage 1966, that has stayed with me:

It kept going through my mind when I was forced to deal with the modern garbage bureaucracy in rural Ontario last week. That, and Mr.K’s recent opus on the same theme gave me some food for thought.

The facts are these. Some cleaning of a relative’s house last week necessitated trips to the local landfill. Years ago, the facility had been open to anyone, with a single geriatric watchman keeping an eye on the traffic – when he wasn’t dozing. Now it’s quite a production.

Arriving with the first load, I was told by the main gate-keeper/garbage triage specialist that I needed a “blue card” to dump any garbage. Of course my relatives with the “blue card” were 3000 miles away. Then I remembered that I, as a local property owner, should qualify for a card. Turn the load around and head to the township office.

No problemo. Got the card in five minutes. Back at the dump, the refuse inspector smiled benevolently at the card and asked me if I had “bag tags” for the garbage. Bag tags? Yes, every bag to be dumped requires a tag, a number of which are mailed out to property owners every year. If my relatives had any bag tags they were, of course, 3000 miles away.

Back to the township office, where the plot thickened. Well, the lady politely explained to me, because I owned “undeveloped” land I wasn’t actually sent any bag tags. I could buy tags for $ 1 each if I wanted. OK, so the $1200 annual property tax I pay gets me exactly nothing. I have the theoretical right to dump garbage, but if I actually want to physically dump something, I have to pay! They already wanted to charge me for un-bagged building materials, metal, etc., based on the visual estimation of the refuse refuser.

So I broke down and bought 20 tags. Bags tagged I went back to the dump. I half expected to be asked for a secret code word, or to produce another, previously unmentioned document, but things actually went fairly smoothly. All I got was a lecture about what could be re-cycled and where – glass, plastic, paper. Fine. Load number one was at last disposed of.

The other two loads were all tagged and sorted to avoid further delays. That was the scary thing actually. By the third sortie I had loaded the vehicle in the way that best suited the arrangement at the dump – I had capitulated! Bags on one side, un-bagged on the other, re-cycling in the front (to be unloaded last on the way out).

So there are really two issues here. As I mentioned, after paying thousands of dollars of taxes to the township for decades, that gets me pretty much nothing. But the money is being used for something. Where there was one lazy municipal employee thirty years ago there are now four.

Secondly, I had no option but to cave to whatever arcane waste disposal scheme the township put in place. Based on Mr.K’s observations, it seems that municipal employees are in cahoots nation-wide, attending waste disposal conferences no-doubt, to determine “best practices” for dumping. I can’t believe our local guys came up with the bag tag idea all by themselves!

The result though, may be exactly what my observant friend noted. Rather than submit to the Big Brother system of dumping, rural residents may choose another route. To paraphrase an ex-premier of Alberta, they may decide to “burn, bury and shut up.”

My rapid acquiescence to “the system” is another concern. Would I rat on my garbage-burning neighbours if Big Brother asked me to? Something I’d rather not think about.

The broader context is that this simply represents another example of the attempted legislation of “moral” behaviour, this time in rural garbage dumps. The unavoidable conclusion is that this attempt at legislating morality will be no more successful than the many others.

July 5, 2008

Council of Canadians: to the left of Barack Obama

I’ve found that ignoring groups like the Council of Canadians makes for a better state of mental health. Its brew of presumption – the name itself suggesting that anyone who disagrees is not quite a legitimate citizen of this country – exaggeration, falsehood and reflexive positioning on the wrong side of virtually every aspect of the great struggle between freedom and statism just makes me angry.

The council’s shilling for a handful of U.S. military deserters (whom it terms “resisters” although they do precious little resisting by merely scuttling off to safety in Canada) is nothing new. I merely yawned and prepared to hit Delete when a press release about these sad men came into my Inbox the other day. But I couldn’t let the background falsehoods about Iraq pass.

One can argue over the legality of the U.S.-led invasion – liberation – of Iraq. But it’s incontrovertible that the current U.S. presence is sanctioned by UN resolutions. It is actively supported by Iraq’s democratically elected government which functions under a written constitution approved by Iraq’s people in a democratic referendum. (On that level, Iraq is more democratic than Canada, which technically remains a constitutional monarchy.) Iraq and the U.S. are currently negotiating a Status of Forces Agreement for the longer term. If Iraq wants the U.S. out, it will leave, a strange move for an international lawbreaker.

Here are the views of Omar Fadhil, an Iraq native and resident of Baghdad who blogs with his brother at Iraq the Model as well as the Long War Journal. Omar – who has lived through the worst chaos of the post-liberation period and whose on-the-scene dispatches brought life in Baghdad to light for readers around the world – kindly supplied this note to Dr. J. and Mr. K.:

Iraq may be a less developed country with a damaged infrastructure, but it isn’t the remote corners of the Congo. It has hospitals, morgues, government records-keepers, police and an army. The casualty reports of all of these agencies add up to a fraction of the claimed higher figure.

The use of “civilians” is also slippery. How are terrorist fighters operating out-of-uniform and dragged to hospital covered in blood to be classified? The council’s implication that the U.S. has been responsible for the sea of innocent humanity snuffed out of life is simply outrageous. The vast majority of civilian deaths have been caused through terrorism by Al Qaeda and the previously allied insurgent groups (some of which are now among its fiercest enemies), and by the death squads under or affiliated with Moqtada al Sadr’s Mahdi Army and the Iranian-run “Special Groups.”

With even U.S. Democratic presidential candidate Barack Obama beginning to revise his position on Iraq, one has to ask: what does the council actually want? Bringing back Saddam from the dead? (Who, incidentally, actually was responsible for 1 million or more deaths through his invasions of neighbours and internal campaigns to annihilate his opponents.) Having Iraq’s democratic government fall to Al Qaeda or the Mahdi army? Making Iraq a protectorate of Iran’s millenarian/apocalyptic tyranny?

Thankfully, the Council of (self-proclaimed) Canadians has lost many of the key battles with which it has been identified, crucially over the Canada-U.S. Free Trade Agreement. Needing to “win” some, it has simply concocted disputes and crises – such as over the non-plan to export Canada’s precious (and allegedly scarce) fresh water to the U.S. The never-planned water exports don’t materialize and – presto – victory! Of course, the fantasy threat persists, so the fight must go on.

July 1, 2008

Pondering gas price psychology

First off, a very Happy Canada Day to all! I won’t wax maudlin on why I’m happy and grateful to live here, because I know our readers will feel the full spectrum of reasons for their own patriotism and affection towards their home and country. Onward to today’s topic.

Finally a voice of reason rang out amid the mob’s hoarse shouts of gasoline price woe. Given the prevailing oratorical ambience, remaining logical and calm made this one an entirely contrarian take. The Financial Post’s Garry Marr pointed out the seemingly obvious fact that driving a family nearly anywhere in North America is still far cheaper than flying or taking the train. That this would be a bold, iconoclastic, innovative and debatable standpoint shows how low the public conversation has sunk.

Perhaps because of the illogic of the gasoline price discussion – at least its news media manifestation – or perhaps because I’ve been trying to reassess my own driving habits calmly and pragmatically, with a view to saving money where it makes sense, I’ve been pondering just why people seem so particularly gripped by the issue.

I must first point out, as in previous posts, that we feel sympathy and understanding for those on a strictly limited income or with high family costs, for whom any substantial cost-of-living increase is difficult to manage. Our bafflement is directed at those who, if the news media reports are correct, are rushing to trade in a $35,000 SUV against a $60,000 hybrid in order to save $1,000 a year in fuel costs.

Why the apparent over-reactions like cancelled holidays, rearranged personal habits, etc., when so many other costly things – clothing, downtown lunches, new electronic gadgets of marginal utility – seem to roll off people’s budgeting radar virtually unnoticed?

I start with the premise that the recent increase in gasoline and diesel fuel prices alone doesn’t justify the intensity of the negativity, nor the range of over-reactions. What could account for them? Perhaps, I thought, people are treating the entire fuel price – their whole bill at the pumps – as if that’s the increase.

How can this make sense? One way could be if the item in question was a traditionally immaterial cost in the buyer’s mind. In other words, if a tank of gas was just one of those things you grabbed on the way home, rushing in, swiping your card, filling up as quickly as possible, and hanging up the nozzle without even glancing at the pump display.

For someone who behaved this way for years, and only recently became alert to what filling the tank was doing to his monthly credit card balance, one can see how today’s price would be rather jarring. $100 to fill the Honda Pilot? Holy smokes! (Or other exclamatory.) Since the past apprehended cost was “zero” – suddenly the cost of gasoline is $100 “more” than before.

Johnny Canuck Driver now starts doing a whole bunch of math. A return trip to Vancouver or Whistler from Alberta: $300. A weekend at the cottage in the Kootenays: $150. A half-day-trip to K-Country: $30. Even a jaunt to the distant big box hardware store becomes a material component of the overall cost if you’re driving 30 km just to pick up a couple of garden hose couplings.

He or she could quickly lose sight of the fact that what’s in question isn’t the total fuel cost, but the year-over-year increase. For years it has cost $200+ to drive to Vancouver and back. The recent increase is maybe $100 – or far less than just the taxes and fees and baggage charges on an airline ticket. But in Johnny Canuck Driver’s mind, the entire price is the “increase” – the increase from a previously immaterial expense that was routinely ignored.

That all may seem a bit convoluted. But it’s the only way I can explain someone “discovering” that it will “suddenly” cost $600 to drive the whole darn fambly to see the Grand Canyon – then panicking or cancelling in anger, and instead blowing $3,000 on some tourism package “deal” instead.

June 28, 2008

Magic Ed's Discount Land Auction Mart

Evidence continues to accumulate that the province’s decision to raise royalty rates (not to be confused with the loosely used term “higher royalties” which implies an increase in actual revenues collected) is self-destructive.

Most readers will have heard of the roaring rebound in natural gas prices, which blasted through $10 per thousand cubic feet (mcf) or million British thermal units (mmbtu) in spring and last week were over $11 per mmbtu, up from the $6 per mmbtu range last year and the low of $4 per mmbtu in the late summer of 2006.

The sudden return of gas prices (as well as continued record high crude oil prices) has certainly rescued cash flows and share values of producing companies and oilfield service providers alike. Capital budgets and drilling rates have stopped their decline and will either be flat or more likely up somewhat year-over-year (still below 2005 and 2006 levels, however).

This is all to the good, but it masks the damage being done. As we’ve said before, much of it will be in the form of foregone opportunity. There’ll be no weeds pushing through the cracked concrete of idled factories, with a few laid-off workers forlornly picketing at the locked gates. It’ll simply be things that never got done, impossible to photograph and difficult for most people even to visualize.

Premier Ed Stelmach last fall declared that if the industry went down following his announcement of higher royalty rates, it would only be because of low commodity prices. Don’t blame him! It seems he had it exactly backwards. It turned out that if the industry didn’t go down, it would only be because of absurdly high commodity prices. The coming new regime appears to have been pre-emptively rescued by the price rise.

But there is hard evidence of the damage being done, as alert reader Paul S. pointed out in a recent e-mail. Alberta has by far the highest oil and natural gas production of the three western-most provinces and the largest land area with oil and natural gas potential. Naturally, it normally accounts for the lion’s share of revenues from auctions of mineral leases (also known as “land sales”). But today it’s routinely being trounced by B.C. and Saskatchewan. We mentioned this phenomenon in several previous blog posts, especially this one in which we pointed out that land sales revenues have virtually collapsed. (Land sales are suggestive of future activity as undeveloped land is required to drill new wells into new, heretofore unrecognized or overlooked oil and natural gas prospects.)

The two “weaker” energy provinces have drawn well over three times as much in freely given auction funds – these are not taxes or royalties, remember – as Alberta. Even starker are the average prices: B.C. nearly $3,700 per hectare of mineral lease, Saskatchewan over $2,100 per hectare. Alberta? $307 per hectare. No, there isn’t a 1, 2 or 3 missing from the front. Saskatchewan made its money with just three sales all year so far, in contrast to Alberta’s bi-weekly auctions.

“It’s a new dawn!” Paul enthuses with the faux zeal of a Maoist Red Guard. “You have to be magical to make revenue disappear with these commodity prices.”

“Magic Ed” Stelmach doesn’t have quite the ring of “Steady Eddy” that his acolytes gave him. Sounds more like a discount furniture huckster. Perhaps that’s suitable, given that he’s now handing out mineral leases for next to nothing.

Paul adds: “I hope someone points out the lost revenue to Alberta, just like they pointed out the ‘lost’ royalties [due to allegedly low previous royalty rates].”

Paul notes that Canada’s natural gas production (the overwhelming majority of which comes from Alberta) is down by a whopping 1 billion cubic feet (bcf) per day year-over-year, or about 6 percent. At today’s prices, that’s $4 billion in gross revenue – of which a solid $1 billion would have accrued to the province as royalties. In fact there’s every chance production in Alberta is down by more than 1 bcf per day, since B.C.’s gas production continues to grow. More of that foregone opportunity.

Natural gas production is also growing strongly in the U.S., where royalty rates are…wait for it…low. This allows producers to plough last year’s cash flows into this year’s new-technology-driven gas plays.

Sadly, we suspect Paul’s hope for big media publicity over Alberta’s “lost” revenues is in vain. Bad effects are only ever pointed out by the news media and activists when caused by conservative governments. They’re irrelevant when coming from the left. Because it’s not the act or the consequence that counts – it’s the intention. And the intention was to get Albertans their “fair share”. That’s all you need to know. Hmm…perhaps Our Fair Share just happens to be far lower than that due to British Columbians and Saskatchewanians. Through, um, lower royalty rates.

June 25, 2008

Idling cars, idle kids

One inadvertent omission in my recent blog about the “greening” of our children was a discussion about newspapers. These days, when you walk to work early, as I do, what do you see? Besides the odd drunk or skunk or squirrel, you invariably see idling cars.

Why? Well, for those of you who are late risers, I may be about to bust a myth here. Those morning papers you so assiduously read every day are not delivered by children. As far as I can tell, the “paperboys” we knew from days gone by no longer exist. No more do kids wade through snow drifts, with frost-encrusted faces, doubled over from the weight of the local dailies packed into bulging canvas bags. They no longer leave their warm beds before the crack of dawn to pull over-laden wagons along the empty streets.

Newspapers are now largely delivered by elderly men in beat-up domestic cars. They leave the driver’s door open, in summer anyway, as they saunter up your walk and throw the bundle on the stoop. The car is idling.

If I were Andy Rooney, I’d say kids are just too well off these days and don’t need the money paper delivery pays. Or their parents are too paranoid of child abductions to send them out alone. By contrast, it seems it pays enough for old geezers who’re up at four A.M. anyway. Why not earn a few bucks while waiting for Tim Horton’s to open?

Back in the day, daily papers got out into the suburbs through essentially family cottage industries, with mothers often acting as distributors, and one or more children, or their friends, employed as carriers. Ironically, not only do today’s kids not do this, it may be those same post-war kids/parents who handled papers then, that are still doing it today.

So it is that the paperboy has gone the way of the dinosaur or, more accurately, the way of that other type of paperboy that you see in old movies yelling “Extra! Extra! Read all about it!” As you may recall, in the golden era of journalism, kids were actually hawking dailies, late and special editions - which would certainly violate numerous labour laws today.

So much have things changed that the statue of the young John Diefenbaker in Saskatoon might need an explanatory plaque before too long. The statue commemorates a boyhood meeting of The Chief with Sir Wilfrid Laurier, when Dief was selling papers downtown to earn a few cents a day. Clearly, no young person could ever meet Prime Minister Harper in similar circumstances today. Instead of young people on street corners we’ve got rusting metal boxes (but more on that later).

But let’s get back to the real problem - the idling cars. Municipalities have already contemplated making idling your car illegal. So here are our wannabe-Green kids actually destroying the planet. While they’re snug in their beds, harmful GHGs are unnecessarily billowing into the stratosphere. In other words, it’s idleness causing the excess idling.

Get those kids moving I say! According to Time magazine, almost one-third of them are obese anyway. Kill two birds with one stone, save the planet and save our kids.

This is indeed an appealing, Green vision. When they’re not walking miles back and forth to school, or hanging laundry on the clothesline, children can lug piles of rain-soaked newspapers from door to door. And the old folks can take a well-earned rest at Tim’s.

June 21, 2008

Mr. K. all wet on securities regulation

This month’s column in Alberta Venture magazine on the (in my view) folly of a national securities regulator triggered a strong response from a reader who reports that he agrees with me on most topics. He has direct experience of the provincial securities bureaucracies and the costs and headaches they impose on companies in the process of entering the public markets.

Reader Eric H. is strongly in favour of a single national regulator, and makes some powerful arguments borne of personal experience. He and I continue to disagree profoundly on this subject, and I believe I have some good counter-arguments to his but, since I had a chance to make my case in print, it’s only fair to present his as well, unchallenged by snide editorial insertions that attempt to undermine his argument in midstream.

First, extensive checking of the regulatory approach worldwide suggests that Canada is, to the best of my knowledge, the only developed nation with provincial securities regulators. It is not just the United States that has adopted this model, but nearly all the rest of the planet. Your argument that “the U.S. has a central regulator and therefore it must be a bad idea” sounds like the medicare arguments against some form of blended private/public medical system. The U.S. does not work, therefore Canada’s system must be superior; despite the fact that the rest of the world has adopted something very different from Canada’s approach.

The Canadian provincial system is an obscene money grab by an inefficient band of ineffective regulators. My company recently raised capital on the private equity markets. No stock exchanges were involved, nor was the general investing public, yet we had to pay fees to the B.C., Alberta, Saskatchewan Ontario and Quebec securities regulators just because individuals from those provinces invested in our company. In some jurisdictions it is a flat fee and in some it is a percentage of the funds raised. Regardless, it is inefficient and costly. Canada is the only jurisdiction I have come across that has these fees that are levied even when they’re out of any proportions to the amount of enforcement work the securities commissions have to perform as a result of your company’s activities.

Not only do most countries have centralized securities regulators, some jurisdictions further improve efficiencies and costs by delegating many of the duties to the investment bankers. I took a company public in London on the Alternative Investment Market (AIM), where the various brokerage houses could earn the right to be a Nominated Advisor (Nomad). The Nomad did the due diligence prior to listing and once it attested to the stock exchange that the listing company had met the regulatory criteria, the listing was granted.

This system places the incentives generated by self-interest at the heart. The investment community of course wants to see lots of new companies listed, and as quickly as possible. But, if the Nomad permitted companies onto the exchange that were subsequently determined to be in violation of the rules, the Nomad would lose the privilege of acting in this capacity, cutting off the source of revenue. This system means the official regulator is not the sole policeman of the markets, because the individual Nomads are also vigilant. A Canadian investment bank is one of the top Nomads in London – showing that we could do it given the chance!

Your article pointed to Enron, Worldcom and Tyco as failures of the SEC. Yet in each case, senior executives were sent to jail for violation of the rules. In Canada you can point to Bre-X and Nortel as instances of irregularities or fraud – yet in each case, nobody has gone to jail or paid a fine. So you need to admit that both systems are ineffective at preventing irregularities – but only in Canada are there no real penalties for doing so.

Lastly and most disappointingly is the opportunity that has passed us by. With “over the top” regulations in the U.S., Canada could offer the world’s mid-cap companies an effective way to access global capital markets by creating an efficient, cost-effective listing venue in North America. The investment banking industry of Toronto, Vancouver and Calgary could offer an attractive alternative to companies that need capital but do not want the expense of Sarbanes-Oxley compliance.

A single securities regulator and an aggressive marketing campaign could add new economic growth to Canada’s financial sector. We could provide true value to mid-sized firms (those under $5 billion in market cap) that wish to operate or merely be listed in North America.
I receive repeated invitations to London Stock Exchange marketing presentations – held right here in Calgary! The LSE comes all this way to market and show prospective companies see how easy and effective it is to list there.

Sad that I have never been invited to a Canadian presentation. Canada’s myriad of securities regulators are too busy defending their turf and charging their fees to act in the best interests of a financial sector that is not living up to its potential. A single securities regulator is needed for the sake of making our industry efficient. A knee jerk “the Americans do it so it must be bad” argument implies that the Canadian status quo is fine – when it is antiquated and problematic.

July 18, 2008

Short Hiatus?