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HomeMy WebLinkAboutThe Wingham Advance-Times, 1985-12-11, Page 344 Page 8B—Crossroads—Dec. 11, 1985 TAKEOVER FEVER Takeove' fever is sweep- ing the corporate world, and it is easy to see the reasons for this "illness." A success- ful record by management no longer is a defence against these moves, and long-term investment seems to be outmoded. The world's commercial banks, after flopping in their efforts to establish them- selves in the Third World, have decided to concentrate their energies closer to home. The banks have con- vinced themselves that the prospect of future cash flow is an adequate security for loans extended to assist takeovers. Looking at bal- ance sheets or adequate security now for loans is con- sidered old fashioned, de- spite the fiascos in the 1970s when these fundamentals were ignored. Banks almost seem to be searching for ways and means to extend loans. If there are no prospective borrowers in the uordinary course of business, then other means must be found, it is claimed. This philosophy explains in large measure the collapse of the Canadian Commercial 'Bank. Another explanation for the takeover fever is the ab- sence of true investors, at least as they used to exist. The speculators who domin- ate the market are in- creasinglyinterested in short-term performance, and this is also the attitude of institutions who control most of the market. Even pension funds change their portfolios with greater frequency. As proof of the rapid turnover of "investments", a New York firm reported that it handled $4.6 trillion: in securities in one year, a volume consider- ably greater than the GNP of the United States. Institutions appear to pre- fer to take short-term profits `rather than attempt to sit .with long-term. investments. As well, most investors, even those that take control of.a. business, .assume an aloof attitude toward their' hold- ings, and act as if they could not affect the, management of these holdings. Of course, by addicatingtheir role as owners, they are engaged" in a self-fulfilling prophesy. Evidence abounds, how- ever, that takeovers do not change management direc- tion or improve profitability over ,the longer term. What in reality these takeover en- thusiasts may gain over the.. short-term, they probably Canada's usiness ruce Whitestone will forfeit over the longer term by missing the major economic moves that carry investments up and down. If they did their homework properly, they would capital- ize on those trends. In the present climate few seem to care. It should be a matter of concern, neverthe- less. Some takeover bids are made at outrageous prices, and they are financedby banks who will be unable to rPenver their loans. Also, in order to ward off hostile bidssome managers con- centrate on job security rather than the health of their enterprise. Another reason for worry is that speculative booms such as exist today have a'_ way of being followed by a collapse which drags down the economy. Unless invest- ors wake up the realities, we all could suffer from this lat- est outbreak of speculation. Mainstream Canada Ars ilacsm Running postal ship a titanic problem By Tony Carlson Pity the poor soul who's shanghaied as the new pres- ident of Canada Post. His or her task is about as enviable as .that of the Titanic's captain. Everywhere t. e new skipper looks he ,vill see 'water gushing in as HMCS Canada Post drifts . on her maiden voyage through the treacherous Straits of Crown Corporations. Even as he takes com- mand he will know that those "in charge, from the shipping line owners in Ottawa on down, have missed or ig- nored the warning signals that fairly shout that the ves- sel is headed for iceberg waters. On the one hand are the pugnacious crew's unions which., in the last eight months alone, have threat- ened the Canadian public with three economy -crip- pling strikes, not to mention the unofficial walkouts and protests that hit pockets of this national rust -bucket. Since 1965, the country has faced 59 strikes, the last of which, 42 days long in 1981, cost the small business sec- tor alone close to $3 -billion. Surely this signals .some- thing fundamentally wrong in the engine room of this behemoth. Then there are the fare - paying passengers, the public who have said in Gallup polies, interest group surveys and Canada Post's own tests that service is lousy and getting worse. Many small firms can document the declining Specials Dec. 9 Dec. 24 10. rolls 26"x500" Christmas Gift Wrap Only 2.59 Large assortment of boxed Christmas Cards 25 % Off • Ganong Delecto 450 gr Chocolates only 5.7.9 _.. Jovan Musk Oil 65 ml. Cologne Spray only 7.99 Old Spice 125 ml. After Shave only 4.39 Buxton M 14. 99 Men's Wallets............. only Charlescraft Curling Iron only 6.99 Humpty Dumpty 200 gr. • Potato Chips Only .§9 Cover Girl LIPSTICK or Professional Mascara only 2.39 - For men or ladies LCD Watches on,y'3.99, 12mm x 15mm, 12mm x 25mm Dominion Tape only .69 Smiles 'n Chuckles1400 gr. Resdan 300 ml. Dandruff Treatment Only 2.99 500's Silver Icicles only .39 25 in a bag Only • Bows _ 99 TRIANGLE N C T HENT MEv1C/#ens r COSMF(EJ ilvs �clros.-.: Open 9 a.m. to 9 p.m. Weekdays - Sundays Noon to Sia service in the dollars it costs in lost contracts, lost bank interest, lost cash discounts and the expense of using couriers instead. In one case, late mail cost one firm $14,000 in a single' year. Because of that, the owner took $10,000 worth of business away from Canada Post. Multiply that by even a fraction of the existing small businesses and you've found a major revenue leak in the post office's hull. This is not new informa- tion. It was known to the previous administration and its political masters but they chose to ignore it. Instead it was full steam ahead on def- icit reduction, an order given by the shipping magnates on Parliament Hill and obeyed slavishly by the ship's of- ficers. The deficit was dramat- ically reduced from $800 - million to $300 -million. But that was mostly due to jacked up fares which, in the case. of first-class accom- modation, rose 100 per cent, from .17 cents a ' letter when Canada Post Corporation set sail to 34 cents today. Yet the owners continued to ignore, the warning signals, just as the dmens and warnings were missed on that starcrossed ship in the North Atlantic 70 years ago. This is not to suggest, of course, that the post office will ever sink beneath the waves. We are stuck with it come hell or high water. Rather, it is to point 'out that the task facing the new captain — surrounded by heavy weather on all 'sides from, customers, workers, and bosses — faces a salvage job that is bigger than any one person. We should not expect a savior for this mess. But we canhope that the pollitical admirals in Ottawa will eventually make the tough decisions needed to refloat this leaky tub, such as freezing postal rates until 1990 and taking away the right to strike. If they don't, then look for more labor mutinies, slower service and higher fares. ACQUIRED CRAFTS The National Museum of Man acquired the 10 -year collection of Bror{fman Award-winning crafts. The Samuel and Saidye Bronf- man Family Foundation and the Canadian Crafts Council agreed to donate the collec- tion and to provide funding for the development of a Fine Crafts Gallery at the new museum which is being constructed at Laurier Park in Hull, across the river from Ottawa. This acquisition will continue through 1985 and, into 1986 when the last two _a -war -d_ -_ recipients .___will -_e - chosen, 3M2 BLANK )Foals 321/0 walloU 111 THE ORIGINAL WORD MAZE.PtlZZLE G O;LANK ALL WORDS TO BE CONSTRUCTED PERTAIN TO THE ABOVE TOPIC. TO YOUR ADVANTAGE ONE WORD HAS ALREADY BEEN TRACED. YOU MUST TRACE THE THREE REMAINING WORDS, USING ONLY THE LETTERS DESIGNATED BY THE DARKENED CIRCLES. WORDS MAY BEGIN AND END FROM EITHER COLUMN BUT EACH LETTER CAN ONLY BE USED ONCE. *** EACH PUZZLE HAS A DIFFICULTY RATING (ABOVE). FOUR STARS SIGNIFY THE HIGHEST DEGREE OF DIFFICULTY. GIVEN BELOW ARE THE POINT VALUES FOR EACH WORD. YOUR WORDS MUST CORRECTLY MATCH THESE POINT VALUES. ® [ LIT © 1983 Ryan Game Company 0 IMI 10 5 O 5� 9 6 lo® TIn ® 6 010 Same income - tremendous difference (NC) — "Wow, l feet great", I explained neighbor A., "I've just found someone who will pay me 12% on a mortgage, interest only, for the dealt ) years on the $100,000 1 got for my hawse. Tell me Mr. B, what rate of return are you getting for your house money?" "Well ..." replied B., "My rate of return varies year by year, but it just so happens I'm taking an income from my $100,000 of 1% per month, paid to me every month, whish is 12% per year, same as you are receiving." "I don't understand," said A., "You are getting the same monthly "in- come" that I am, but you don't know what your money is earning?" Up to 4O%... "That's right," B replied, "But based on past perfor- mance, I can expect that some years my invest- ments in mutual funds will earn 20% and up to 40%, and 1 know there will be some years with very little gain, or even a Toss. But past per- formance of the mutual funds I am in have proven that they average over 15%, some as high as 20%, given 10 -year time spans." "Sounds risky to me" rep- lied A. "I think 111 stick to my guaranteed return of 12%. We both have our pen- sions of $10,000 per year, combined with our $12,000 income from our $100,000 house sales, giving us $22,000 a year. Boy, ain't re • - tirement grand!" ADVERTISEMENT IFS YOUHi MONEY Paul J. Rocket Who do you think was the smarter, A. or B?" And ... in fact, did they really both have the same income to spend?" Think alloutit,beforeyou answer. Think about it from a tax point of view. With that pension in- come of $10,000 per year, gad that investment in: come of $12,000 per year, they would both be in the 34% tax bracket on the lat- ter part of their incomes. So, shouldn't they both enjoy the same standard of living in their retirement?" The answer is a resound- ing "no"! •A.'s interest income was fully taxed, and at the 34% tax level, he lost over $4,000 per year to taxes, on his "guaranteed" 12% interest investment. B., on the other hand, went .on a "monthly withdrawal plan" of Proper month (12% per year) and that income came to him completely tax free, espe- cially since the May 85 budget with its lifetime cap- ital gains exemption of $500,000. More to Spend Does that mean he has $4,000 more per year to spend than A., because he pays no taxes, whereas B pays over $4,000 on his in- vestment income?" Actually, B. has even more to spend A. has to pay tax on his combined pen- sion and investment in- come, whereas B. pays tax only on his pension income. Therefore, B. is in a much lower tax bracket, and doesn't pay as much tax on pension income aa A. does They do have the same 'income', but there is a tre- mendous difference in their individual spendyng power. Which of them do you think was the smartest? P.S. — If this had taken place 21 years ago, and now both were to die, A. would stili have his $100,000 gua- ranteed investme,nt to leave, whereas B's. non - guaranteed investment in - the Templeton Growth' Fund would leave over $800,000 to his estate. For a FREE exampleofa "Mutual Fund Withdrawal Plan" over the past 21 years, ask for "Templeton 12% withdrawal' and write: Paul J. Rockel, 153 Union St. E., Waterloo, On- tario, N2J 1C4. Paul J. Rocket is President of Regal Capital Planners Ltd. and of the Independent In- vestment Fund Dealers As- sociation of Canada. ~t C-cZ-:Dred TIS QUALITY &VALUE ADVANTAGE ,7)2d BUYER'S CHOICE i CASH BACK FROM FORD ESCORT• LYNX• TEMPO • TOPAZ MUSTANG • CAPRI The $500 Cash Back From Ford offer is available on 1985-1986 models of Escort, Lynx, Tempo, Topaz, Mustang and Capri sold , and delivered to retail customers from dealer inventory. FINANCING ESCORT• LYNX• TEMPO • TOPAZ MUSTANG • CAPRI • RANGER • BRONCO II The 9:5% Financing offer is available on 1985-86 models of Escort, Lynx, Tempo,, Topaz, Mustang, Capri, Ranger and Bronco I1 models. It is available on the full amount financed for the full term of the contract, maximum 36 months, for retail deliveries from dealer inventory. Extended term financing at a favourable rate of 11.5.% from 37 to 60 months is also available. 1 Buyer's Choice extended to Dec. 31,'85! 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