JB

I posted the general articles and then mentioned I thought I had seen a quote from M Binnion re looking at possibilites to aquire. Here is the quote (scroll down to the yellow highlight). It did seem to contradict previous convential wisdom that the best use for the cash reserves right now was to get through the testing and developing phase and into production. I wasn't putting forth an opinion just noting what was published.

HOW TO GET THINGS MOVING

Slash taxes and interest rates, spend on infrastructure and training, feel free to run a deficit - and do it quickly. That's what Canada's pessimistic business leaders are telling Ottawa

RICHARD BLACKWELL

rblackwell@globeandmail.com

December 15, 2008

Canadian business executives want tax cuts, further interest rate reductions, infrastructure spending and money for training to pump the economy as they plan cutbacks of their own.

In the latest quarterly C-Suite survey of top executives, which shows those in the corner office are hunkering down for a major rough patch, respondents called on Ottawa to get the economy moving and pull it out of the downturn as fast as possible.

The survey was conducted in November for Report on Business and Business News Network by the Gandalf Group.

In their responses, executive presented a list of actions they would like Ottawa to take. At the top of that list are corporate tax cuts and interest rate cuts, both considered "very helpful" or "somewhat helpful" by almost 90 per cent of those surveyed.

Infrastructure investments and funding for employee retraining are also crucial, most executives said, and a large majority said a federal budget deficit should be permitted to get stimulus spending flowing.

The advantage of infrastructure programs, said Harvie André, a former Progressive Conservative cabinet minister and now chief executive officer of Calgary-based Wenzel Downhole Tools Ltd., is that they involve one-time capital spending that shouldn't contribute to continuing budget deficits in the years ahead.

Another benefit: Virtually all the spending will remain in Canada.

Whatever the recipe to fix the economy, most executives surveyed are pessimistic about the next 12 months. Fully 85 per cent expect a moderate or strong decline in the Canadian economy over the next year, by far the most negative projection since the C-Suite survey began three years ago.

After 21 years in Parliament, including almost a decade in cabinet, Mr. André is in a unique position to suggest what Ottawa should do to help Canada recover from a projected recession.

In Mr. André's view, tax cuts and infrastructure spending are the best tools to get the economy moving again. Bailouts to large industry players are less effective, although he acknowledged they are inevitable in this political climate.

It is "futile and horrendously expensive" to try to stop the job losses that are certain to take place in a recession, Mr. André said.

However, it is possible to help with job creation, particularly among small enterprises that can respond quickly to tax cuts by expanding their businesses, he said. In addition, "their horizons are primarily domestic," so Canada gets the direct benefits of any new jobs.

Still, Mr. André, who served in Progressive Conservative cabinets from 1984 to 1993, acknowledged that there is tremendous - and irresistible - political pressure to try to help big companies with large numbers of employees, even though that action may "not really be that productive."

In response to the downturn, executives are taking actions of their own. More than 80 per cent said they will likely trim operating expenses, possibly through job cuts. Three-quarters said they will likely cut capital spending, while more than half said they may dispose of non-core assets.

About half of those who responded, however, said they'll likely consider using the economic downturn as an opportunity to make purchases on the cheap.

One company in that boat is Questerre Energy Corp., a Calgary oil and gas exploration firm that was fortunate to have completed a $75-million financing just before the market turned down. It now has no debt and positive cash flow, plus excess cash in the bank, said CEO Michael Binnion, so it is in a position to go shopping.

"We're actively thinking, analyzing and looking at ... where we would want to buy, and what we could buy," he said.

The problem, he said, is that Questerre will likely be spending its money on assets that are already drilled, rather than doing new drilling itself. "That doesn't create any employment, does it?"

Over the long term, Mr. Binnion hopes any weaker company his absorbs will eventually grow and contribute to job creation when the economy recovers.

Many companies are not in same enviable position as Questerre. Almost all executives surveyed said it is harder to get financing now than it was two years ago, and more than two-thirds said it was "significantly" harder.

"The single biggest challenge we face is the access to capital," said Michael Pyle, CEO of Winnipeg-based Exchange Industrial Income Fund, a diversified trust that owns small airline and industrial manufacturing operations.

Exchange Industrial is a "serial acquirer," Mr. Pyle said, so its activities have been crimped by tight credit markets. Bank financing is still available, he said, although increases in pricing by financial institutions are offsetting the drop in the prime rate. But the alternative - going to the equity markets - is extremely difficult now.

Many executives are preparing for a long siege. More than 90 per cent of those surveyed said there will be no turnaround for at least six months, and 44 per cent said there will be no growth for at least another year.

David Yager, CEO of HSE Integrated Ltd., a safety service company based in Calgary, hopes things begin to improve in the second half of 2009. At the moment, he said, "everybody is in the end-to-life-as-we-know-it camp," but oil prices should rise next year, giving a boost to companies in that sector.

Mr. André, of Wenzel, is even more optimistic. He said he thinks "we'll be feeling a little bit better about the future come March, although we won't yet be out of the slower times."

The massive amount of government support should have had some impact by then, he said. "There's been a colossal amount of money put into the system around the world by all kinds of governments, and it is hard to believe that's simply going to go down the sewer with no effect."

Mr. Pyle of Exchange Industrial said he thinks one vital element for a turnaround is for politicians and economists to "stop talking the economy down."

Consumers and business people are being constantly admonished to stop spending, he said, and that is making a long downturn a self-fulfilling prophesy.

Recessions, he said, "happen because people think they're going to happen."