Is Mark Carney on the Right Track?

When Bank of Canada Governor Mark Carney was named the Chairman of the International Financial Stability Board (FSB) back in November, I assume he wasn’t expecting the kind of attention he has received in such a short amount of time. Two weeks ago at an official FSB meeting in Basel, Switzerland, Carney, successor to Italy’s Mario Draghi, was met with questions regarding Philipp Hildebrand; a long-time friend and former second in command at the 24-nation-member-strong FSB. Hildebrand recently lost his positions as Chairman of the Swiss National Bank and Vice-Chairman of the FSB following an insider trading scandal that involved his wife Kashya Hildebrand. In a Globe and Mail article G24 (Group of 24) Secretariat head Amar Bhattacharya and former US Treasury Department official Edwin Truman appeared to express doubt about Carney’s ability to run both the FSB and the Bank of Canada. This is because Carney would be responsible for setting the fiscal policy for both institutions without the help of a Vice-Chairman at the FSB as Carney will reportedly not replace Hildebrand. Back in November when Carney was named head of the FSB at a meeting in Cannes, it stands to reason that the other 23 nations involved found security in naming a central banker who ran the world’s soundest banking system. A 2008 survey by the World Economic Forum named Canada ahead of Sweden, Luxembourg and Australia as the healthiest banking system in the world.  This is not to say that Canada is not being affected by the global recession as the country is experiencing levels of unemployment up to 7.5% as of two weeks ago. And under Carney’s careful direction The Bank of Canada is not expected to change domestic interest rate policy continually sighting that Canadians have too much debt on the balance sheet. Despite this Canada is starting to shine on the world stage as an example of what sound management can achieve. Carney, who was named one of Time magazine’s 100 most influential people in 2010, is said to have the support of other Canadian financial leaders at the FSB, Tiff Macklem (Bank of Canada Senior Deputy Governor) and Julie Dickson (Canada’s Superintendent of Financial Institutions) and is looking at making changes. Carney says the FSB, “is also considering tougher regulatory treatment for the ‘shadow’ banking system, which includes money-market funds, credit hedge funds, special investment vehicles and government-sponsored mortgage companies such as Fannie Mae and Freddie Mac in the United States,” the Globe and Mail reports. Furthermore, the US Federal Reserve has recently said that it will adopt Carney’s tougher banking rules outlined in the “Basel III” structure despite reportedly being seen as anti-American. No doubt Mr. Carney will have his work cut out for him over the coming months. We have all put our trust in to the hands of the FSB, a group of bankers who meet quarterly whose decisions direct our fate. Let’s make this a topic to keep an eye on. We wouldn’t want to stand by and watch as the FSB made the wrong choices. | Raymond Matt, CFP, CLU, TEP, CHS | The Ontarian, Writer, Editor

What’s the Best Part of January?

…the NFL Playoffs of course! January is often met with early signs of winter blues; Christmas and New Year’s has passed and for us northerners the novelty and beauty of snow has given way to the dirt-laden slush and cold temperatures we have to tolerate until spring. One of the best escapes for me is enjoying the NFL’s Playoff games in front of the big screen; from January 7 until February 5 you’d be hard-pressed to find me elsewhere on a Sunday afternoon. The Playoffs get me thinking of the similarities between a great football team and its players and a great business owner and their organization. Like the football player a business owner tends to be a rugged individualist; at least that’s how it starts. They have a personal vision in mind, stronger than they can explain sometimes, and they push themselves to great heights because of it. But that same business owner knows, like the football coach and his players that without a strong team-first mindset they can only get so far. A successful football play requires every teammate to work as a cohesive group while being directed by a strong leader; each player must be at the right place at the right time while doing the right things to achieve a positive result. As coach Bill Belichick likes to say, “just do your job!”, and he should know having been named AP NFL Coach of the Year for the 2003, 2007 and 2010 seasons leading the Patriots to four Super Bowl appearances: victories in Super Bowls XXXVI, XXXVIII, and XXXIX and a loss in Super Bowl XLII. These are all things we associate with a strong entrepreneur and a strong Quarterback; the result is a strong team. One of my all time favorite QB’s, the four-time Super Bowl champion and two-time MVP Terry Bradshaw of the Pittsburgh Steelers, had to work with his teammates to attain his accolades and achieve the level of success that he did. Any successful business owner worth his salt must also look to his or her team to reach their enterprise’s full potential. The games played this past weekend yet again provided an example of the level of preparation required – both mental and physical – as the 49ers and the Saints exchanged play for play, and in my opinion, gave us the best game of the weekend taking it right down to the wire with the 49ers winning 36-33. The Ravens and the Texans put on a spirited show in Baltimore with former coming away with the victory, 20-13. Brady’s Patriots were focused and dominating with no big surprises, shutting down the Bronco’s 45-10. No divine intervention for Tebow this time round. And the biggest upset was the Jets over the Packers 37-20. Rodgers just couldn’t find his rhythm and the team as a whole just seemed out of sync despite the fact that they finished the season 15-1 and where the favorite. I’ll be happy to watch which NFL teams make it to Super Bowl XLVI, and without a doubt the two teams that will inevitably square off on February 5 will have a powerful Coach who understands his team, a powerful Quarterback who knows how to execute with impeccable timing and the knowledge that success can only be achieved if the individual player understands the worth of his teammates. And I suspect that the players will also know that a big part of winning is showing up ready to play, making sure you are in the right place at the right time and executing on every play! My guess: Jets and Patriots. But in the end on any given Sunday it all comes down to being prepared and of course a little luck doesn’t hurt. | Raymond Matt, CFP, CLU, TEP, CHS | The Ontarian, Writer, Editor

A Unique Asset Class

A private business owner’s primary objective tends to revolve around the financial strength of the business enterprise; the “goose” that lays those golden eggs. However, at some point the business will mature and there will be excess funds, over and above the needs of the business; it is at this point the successful owner looks to acquire quality assets in order to diversify the personal balance sheet. We do this for ourselves, the pride that comes from doing something well, our family and the community at large. One asset class that is often deemed a cost, or necessary evil, rather than an asset acquisition is life insurance and it often gets overlooked. Life insurance is a unique asset class because it is tax exempt. In a corporate setting the insurance benefit qualifies for Capital Dividend Account (CDA) treatment, effectively converting taxable retained earnings into tax-free capital dividends at life expectancy. If the policy is over funded the cash value can be invested in a variety of ways ranging from guaranteed accounts to indexed market accounts or equities – all tax-exempt. Given the right fact pattern you can protect the insurance benefits from creditors and the cash in a life insurance policy can be accessed for retirement as most Canadian banks accept these policies as collateral. A pure life insurance play is not subject to market fluctuations making it an excellent choice as a succession asset. When considering your options for retirement or succession make an informed decision and take a close look at the many benefits offered by a properly structured life insurance plan; a unique asset class. | Raymond Matt, CFP, CLU, TEP, CHS | The Ontarian, Writer, Editor

Great Change of 2011

In a article published last week distinguished historian, writer and thinker Eric Hobsbawm made notable parallels between 1800’s Europe and the Arab Spring revolutions of today, also noting the wave of North American and European anti-rich or 1% protests that have been taking place since the autumn of 2011. The article brought to mind the book 1848: Year of Revolution written by Mike Rapport, which I’ve taken to reading for the second time, that outlines in vivid detail the rash of revolution seen in that year that spread across Europe altering countries like Germany, Belgium, Austria, Italy and France.

Great change is often bloody and violent. Even Mohandas Gandhi’s peaceful protest for India’s independence resulted in his assassination in 1948, “I am a man of peace. I believe in peace. But I do not want peace at any price,” he said during a 1921 address to Ahmedabad Congress. And still more, former South African president and anti-apartheid leader Nelson Mandela fought for years as the head of a Guerrilla-styled armed group, albeit from his prison cell, that was classified as a terrorist organization by the South African and United States governments, all the while thousands suffered at the hands of those that fought to maintain apartheid.

The need for the professed 99% to revolt is as inherent and passionate as the aptly coined 1%’s need to acquire — whether it is land (Britain’s continued involvement in South America’s oil-rich Falkland Islands despite the Munroe Doctrine), wealth, or sovereign power.

As the new year of 2012 begins it is already being met with caution and further upheaval. EU leaders have made a point to state from an economic perspective this year will be grim. To put things into perspective 5,000 Syrians have reportedly lost their lives, many of whom were said to be unarmed, during the people’s struggle to overthrow their oppressive government. And Iran is flexing its muscles in the Strait of Hormuz by test firing ‘long range’ missiles in response to the threat of additional international sanctions.

For those curious about what 2012 may bring, know this; change is inevitable. At the beginning of 2011 Iran wasn’t threatening the closure of the Strait of Hormuz. North Korea’s “supreme leader” Kim Jong-il was alive and provided a modicum of stability in an unstable region. And the end-of-year US election will see President Barack Obama fight for reelection against a yet undecided republican candidate in an election that could prove to be yet another turning-point in US history.

The revolution and restructuring that occurred in 1848 was the Western World’s fight for equality vs. monarchial power; that epic struggle for universal suffrage, freedom of the press, a fair wage and healthy living standards. World events today reflect the continuation of that great effort.

It is in change that things find purpose, and nothing endures but change. Heraclitus, Greek philosopher (535 BC – 475 BC).

| Raymond Matt, CFP, CLU, TEP, CHS | The Ontarian, Writer, Editor


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