They spill more than we drink

I should have known when I read the title of the study, Mortgages or Margaritas, which choice Jamie Golombek, managing director of CIBC Wealth Advisory Services, would take. With RRSP season about to wrap up next Monday, readership on the thorny question Golombek was addressing – pay down the mortgage or invest your money in a balanced portfolio – was bound to be high.

Surveys have shown that three-quarters of Canadians favour paying down debt but Golombek says that "when interest rates on debt are low, the short-sighted objective of getting out of debt now may actually negatively impact your long-term retirement savings." Golombek's thesis is that when the rate of return on investments exceeds the rate of interest on debt, investing in an RRSP or a Tax Free Savings Account makes more sense than paying down the mortgage quickly.

Who could disagree? But all of his examples assume mortgage rates of 3 percent and an annual return on investment of 6 percent over a thirty-year period. Mortgage rates are very unlikely to remain that low for that long, but more important, a long-term 6 percent annual return is not easy for an individual to attain. When Claude Lamoureux ran the Ontario Teachers' Pension Plan, he used to tell me that 6 percent was the best he could expect in the long haul even though Teachers' has hundreds of people picking stocks and running the numbers.

I recently met with the wealth advisory branch of a competitor to Golombek and their ten-year rate of return was 6 percent – before fees. After fees it was 5 percent. So I emailed Golombek and asked what his prognosis looked like at 5 percent. "The numbers don't look as good," he admitted. "The examples were meant to be directional." He pointed me to a report he'd done in February 2013 where he did use a 5 percent return but the charts aren't comparable to those in the current study. What is clear, however, is that the difference between paying off the mortgage and saving at 5 percent is nowhere near as advantageous as it is at 6 percent. 

Maybe all this should be no surprise. Golombek works for a bank. A bank makes money when a client does both: take time to pay off a mortgage AND invest in the market. In this case, it seems like mortgages for the client and margaritas for the bankers.

I walk the line

Regular readers of this blog will be aware that I like Justin Trudeau. I have said he is well versed on policy and is an excellent retail politician. Many people who know me well are incredulous that I could support a Liberal after working for Robert Stanfield. But as Trudeau himself said, when we met and I told him I'd been with Stanfield and tried to defeat his father, "So, you're a Progressive Conservative." Exactly. And our current prime minister is anything but.

Truth be told, I'm a Pearsonian Liberal and actually helped the Liberals during the 1963 federal election. A bunch of us high school students walked the 20 miles from Erin to Guelph one Saturday in support of Liberal candidate Ralph Dent. (He lost to the incumbent, Alf Hales.) When I was hired to be Stanfield's press secretary in 1970, I had never even voted for the PC party. They were looking for someone with media experience, not a partisan, but I quickly came to admire Stanfield's wit and wisdom.

Whether I was returning to my roots, or just had enough of Harper, I was drawn to Justin Trudeau and his views. He was, after all, the first major politician to denounce the Parti Quebecois plan to banish religious headgear.

Oh sure, there were the early mistakes. Dropping the f-bomb in a speech, expressing "a level of admiration" for China, and accusing Harper of whipping out our CF-18s "to show them how big they are." But all were relatively innocuous, even if they came with a certain regularity.

I was out of the country for the latest faux pas, welcoming Eve Adams to the Liberal Party. What a fiasco. Adams had nowhere else to go after riling everyone in the Conservative Party. So why did Trudeau join her at the announcement news conference, all but declare her the Liberal party's nominee in the riding of Eglinton-Lawrence, and assign her some top campaign help? So much for Trudeau's previous declaration that he would let the locals do the picking. 

If no one on his staff told him that his public support for Adams was a bad idea, then his staff is woeful. If they did tell him, and he didn't listen, then his political judgment is sorely lacking. So far, voters are either forgiving or not paying attention. Polls have the Liberals either tied with or ahead of the Conservatives. But as far as I'm concerned, many more stupidities like the Adams endorsement and I won't be walking in Justin Trudeau's election parade.

The cho$en few

Stephen Poloz was appointed Governor of the Bank of Canada in June 2013. The Canadian dollar has been declining against the American dollar ever since. Could this collapse have anything to do with the fact that Poloz, who worked at the central bank earlier in his career, came back to the bank following almost 15 years with Export Development Canada, his final two years there as CEO?

Let's see, what does Export Development Canada do? Why they finance, insure and generally grease the wheels of exporters seeking to sell their goods abroad. And what have exporters been complaining about during the last few years? They wanted desperately to get back to the halcyon times of 2002 when the C$ was worth a piddly 64 cents U.S. That meant our exports were cheap when sold in the U.S. and Canadian manufacturers enjoyed an artificial boost against competitors from other lands. 

By 2007, the C$ was above par, and lazy Canadian exporters were apoplectic. Their advantage was gone. Things had improved for them slightly by the time Poloz was appointed Governor when the C$ was worth US95 cents. And then, mirable dictu, with an exporter at the helm of the Bank of Canada, the C$ started to fall to the point where it is now hovering around US80 cents.

Oh, thank you Governor Poloz, for maneuvering the value so well. Your last interest rate cut sent the C$ – already suffering from falling oil prices – down even more. And with all the talk of another rate cut in March or April, the C$ has been further destabilized. 

Moreover, in addition to newly exuberant exporters, Governor Poloz would also like to please Prime Minister Stephen Harper. With an election due no later than this October, the governor would like to help out the ruling party by getting the economy into higher gear using lower interest rates. With lower rates and a falling dollar, his former colleagues and benefactors at EDC as well as his political bosses are happy and the Governor can expect praise from both.

The rest of us, forced to buy imported goods at higher prices because so much of what we consume is made elsewhere, don't seem to matter a whit in this monetary equation. Nor do any of the major players seem to care about the higher rates of inflation that will almost certainly result and further reduce our purchasing power. 

Imagine, all this public policy effort for the precious few manufacturers left in Canada. Makes you feel kind of humble. Or had.

A life of giving back

Canada has lost not just a giant in the business world but a cultural maven and generous philanthropist with the death of Joe Rotman. I can't think of another corporate leader in Canada today who was so dominant across such a wide range of activities.

His life was a classic case of entrepreneurialism where you see a field that needs expertise and investment, you calculate the risks, then step in. Starting in the unusual world of oil futures, Rotman also became involved in oil and gas exploration, real estate and venture capital. In 1987 he launched Clairvest which in turn backed other peoples' ideas, the riskiest business of all because you're often betting on the jockey, not the horse. In that regard, Rotman was a great judge of character, not just the numbers on some term sheet.

As if that weren't enough to set him apart from his contemporaries, Joe and his wife Sandra collected modern art with a passion and an eye for talent. He also shared his wealth with the community and the nation at a level matched by few others. His lead gift to the business school at the University of Toronto long before such donations became de rigeur has meant that the Rotman School of Management had the heft and the wherewithal to build a faculty that has placed it number one in Canada most years on the prestigious Financial Times rankings. His other philanthropic interests included a broad range of enthusiasms that stretched across the life sciences, brain research, and innovation.

With Joe Rotman, life was never just about him, it was about his family, his community and his country. But his greatest strength had nothing to do with what he did with his life or his money. It was his sunny disposition. I've never known a happier man. I will miss seeing his smile. 

A woman of substance

Jalynn Bennett, a pioneering business executive and one of the warmest people I've ever met socially, has died at 71. Her combination of brilliant insight and self-deprecation was a delight to behold. 

After graduating from Trinity College in 1965 with a degree in economics she was forced to do what many well-educated women did at the time, take a lowly secretarial job. In her case, she worked at Manufacturers Life Insurance Co. (Manulife) where CEO Syd Jackson recognized her prowess. Within twenty years of joining the firm she was a vice-president and among three female executives reporting to Jackson, a high-water mark for women that few firms have matched since. Her recent board roles (CIBC, Rexel Canada Electrical, Teck Resources Ltd.) set a public standard in a country where half the boards have no female directors at all. 

When the men-only lunch clubs, York and Toronto, decided to finally open their membership to women in the early 1990s, Bennett was their first choice. But the change did not come without friction. Speaking against her at the special meeting called at the York Club was her own uncle, Len Lumbers, Chairman of Noranda Manufacturing. The resolution passed, Bennett became a member, and she held no rancour against her relative for his stance. 

I ran into Bennett in 2009 in her beloved Nova Scotia where she summered. We were all on line waiting for the annual Folk Art Festival in Lunenburg to open. She had just read my book on Manulife, and although she was long gone from the place, I was pleased to learn she thought what I'd written was accurate. She immediately homed in on one of my favourite moments in the book, where I took off my shoes and socks and placed my naked feet on the manicured putting-green grass that surrounds the head office on Bloor Street. 

Bennett laughed with enjoyment at my so-called reverential sensation. She always went to the heart of the matter.