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Andrew Willis: What if the BCE takeover deal falls apart?

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

So after all the fuss and bother, BCE may remain an independent phone company. What does that mean?

Well, here's one scenario at what's coming for a classic widows and orphans holding. The damage to the stock price has already been done. If the Teachers bid really does fall apart, and it may take till November to actually die - then BCE will start life anew by doing one huge share buyback.

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Andrew Willis: The backlash over billionaire hedge fund managers

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

The U.S. financial magazines are running their annual lists of who made what in the fund manager world.
This is Wall Street's version of pornography. You get pictures of young traders, posed with ties askew, on the edge of their desks, or leaning up against an enormous globe. And you find out one of these pups made $3.7 billion dollars last year.

That was the record-setting compensation paid to a fellow named John Paulson. Five hedge fund managers made more than $1 billion last year. You had to make more than 200 million bucks to crack the top 50 players in this game.

Now, I think this incredible show of wealth is going to provoke a backlash. First, consider the way this money was made.

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Andrew Willis: Who gets the blame if the BCE buyout unravels?

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

Who will get cast as the villain if the BCE buyout fails? The deadline draws near on the world's biggest leveraged buyout.

Look for the $35-billion cheque to be written some time in May. it's pretty clear who wants to wear the white hats.

Jim Leech, the newly-named CEO of the Ontario Teachers' Pension Plan, wants to emerge a hero. He has remained solidly behind this buyout since closing the deal in late June. The Teachers' fund is the very definition of patient money, so Mr. Leech can afford to stick by his guns. He isn't going to start his tenure at the top of a globally-relevant fund manager by reneging on a globally-watched deal.

The same can be said for Toronto-Dominion Bank boss Ed Clark, who is showing unflagging loyalty to a corporate client. He is reassuring the bank's shareholders that a $3.8-billion commitment to the BCE takeover is financially prudent.

So who might break away?

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Andrew Willis: Containing the fallout from the U.S. mortgage mess

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

You knew this credit crisis was getting serious when economists started comparing what's happening today, in U.S. housing and banking, to what happened back in the Great Depression.

As students of financial history know, the American government made the depression far worse than it had to be. Ben Bernanke - the head of the U.S. Federal Reserve - joked about this in a speech back in 2002. He said the Fed was very sorry for turning a reccession into a depression. and they wouldn't do it again.

Now, that line is no longer a joke. The Americans are throwing everything they've got into propping up Wall Street. The risk is that the failure of one bank - Bear Stearns, for example - would quickly cause the failure of other banks, around the world.

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Andrew Willis: A budget that will play well at Tim Hortons

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

The federal Conservatives talk about voters in terms of their coffee tastes. I am not making this up.
Stephen Harper and his gang sit around in meetings, sipping their own java, and discuss how to win the hearts and minds of the people who line up at Tim Hortons every day.

That's the vast middle class. They drink double-doubles.They indulge in the occasional cruller. And if they start voting Tory, then Prime Minister Harper gets the majority government he so desparately wants.

Which brings us to the latest budget, and the Tax-Free Savings Account. The new savings plan was the centrepiece of the budget. It allows Canadian to set aside $5,000 annually, and pay no tax on the income. They can take out the money any time they wish.

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Andrew Willis: Are Canadian home prices about to tumble?

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

Like most folks, a big chunk of my personal wealth is tied up in my home. That's been one of my better investments.

House prices in my lakefront neighbourhood in Toronto have risen by 10 per cent annually for as long as i can remember, and my memory as a homeowner goes back 15 years.

There's an increasing number of experts saying the good times are coming to an end in the housing market.
We all know what's happened to our American friends. The U.S. housing market got totally overbuilt, and the average price of a home is now expected to tumble by 15 per cent this year. That will vapourize more than $2 trillon of personal wealth.

Economists still expect Canadian house prices to rise - Royal Bank is forcasting a 5 per cent rise, nation-wide.
These rosy projections are starting to look unrealistic.

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Andrew Willis: Why there will always be rogue traders

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

Have you been following the latest tale of a rouge trader, losing billions on bad bets in the market? A scandal has blown up over the past week at France's largest bank - it's called Societe General, or Soc Gen.

This sort of thing happens with depressing regularity. The only thing that changes is the amount of money involved. the sums tend to get larger and larger.

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Andrew Willis: When hedge funds become shareholder activists

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

Running a hedge fund used to be easy.

We went through a record-setting round of takeovers last year.Tthe hedge fund crowd would simply buy stakes in companies that were being acquired, wait for the deal to actually close, and pocket a tidy little profit. Billions of dollars were invested using this basic strategy.

But now we are into a credit crunch.Takeover traffic has dropped of dramatically. Yet those hedge funds are still sitting on billions of dollars, and they don't get paid if they don't put that money to work. So what are these highly caffeinated, ultra-aggressive money managers doing? They are creating takeovers and other events that move stock prices, all by themselves.

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Andrew Willis: The credit crunch and moral hazard

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

Ever heard of a concept called moral hazard?

It's the idea that people who are insulated from risks behave very differently from those who bear the full responsiblity for their actions.

In other worlds, I'll drive my car like an idiot if I'm insured against all accidents, while I'm far more careful if I have to pay a $2000 deductible on any fender bender.

The Canadian bank CEOs are fretting about moral hazard right now. The banks are on the verge of being forced to do something that will encourage reckless behaviour in financial services.

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Andrew Willis: Encouraging investment in alternative energy

Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

There’s a company in Hamilton called Biox that is very much in step with the times. Biox is what’s known on the markets as an alternative energy play. It takes the yucky dirty oil out of restaurant kitchens - the junk left over after McDonald's makes fries all day - and recycles that waste into a biodisel fuel. It’s a great green company. Environmentalists love Biox.

Investors have no interest. Biox tried to raise $100 million in an intial public offering recently, and couldn’t find backers. The IPO got cancelled.

There are a number of other alternative energy companies in the same boat. They’ve got cutting edge technology such as solar panels, or the right to develop a windmill farm. But they can’t find public market backers.

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