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Baldo Minaudo is a management consultant specializing in corporate development involving strategy, finance, marketing, investor relations. He has authored ‘The Banker Who Saved His Soul’ and is the President of MetroActive Lifestyle Network. He is reputed to be a master networker with one of the most extensive networks in Canada and reaching across the globe.

Product Sampling Gets New Business

Written on January 9, 2012 by Baldo in Baldo Minaudo

Product sampling reaches 70 million American and 9 million Canadian consumers every quarter. According to a “Product Sampling Study” conducted by Arbitron and Edison Media Research, one-third of customers who sample a product, will buy the sampled product in the same shopping trip. In addition, 58% of those surveyed reported they would buy the product again.

In the study, consumers sampling the product were grouped into three categories: Acquisitions (those new to the sampled product); Conversions (those who had heard of the product but had never bought it); and Retentions (those who had previously purchased the product). The results revealed that 85% of Retentions and 60% of Conversations said they would purchase the sampled product in the future. Importantly, 47% of Acquisitions said they would purchase the product in the future.

Other findings:

- 35% claimed they purchased the sampled product on the same day: 26% of Acquisitions bought the product right away, as did 19% of Conversions and 31% of Retentions.
- 24% of those surveyed claimed that a sampled product had specifically replaced an item that they had planned to buy: 20% of Acquisitions were planning to make the switch, as were 33% of Conversions and 18% of Retentions.

This translates into an immediate and long-reaching impact on consumers with a high return-on-investment for the marketing and sales budget. The study shows that a sampling approach is both effective in making new customers aware of products, while establishing a better position with those consumers who have considered the product before.

MetroActive, a business organization based out of Toronto, Canada with over 13,500 members is fully aware of the power of sampling. The organization allows companies to sample their products and services to its members, mostly corporate executives, business owners, entrepreneurs and other business professionals through its “Member Offer Program”. These highly sought after consumers have the highest disposable incomes and an appetite to spend their money. For only $25 a month companies can offer samples and discounts on their products and services to the MetroActive members as part of the membership package. For details visit http://metroactive.org/wordpress/member-offer-program/

About the study: Arbitron and Edison Media Research conducted a national telephone survey from January 18 to February 15, 2008. 1,857 respondents, ages 12 and older, were selected at random from Arbitron’s 2007 fall diarykeepers. In geographic areas where Arbitron diarykeepers were not available (representing 8% of the population), a supplemental sample was interviewed through random selection.

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Scotiabank’s Commodity Price Index Shows Retreat in October

Written on November 26, 2011 by Baldo in Baldo Minaudo, The Banker Who...

TORONTO, Nov. 24, 2011 /CNW/ – Scotiabank’s Commodity Price Index, which measures price trends in 32 of Canada’s major exports, lost further ground in October, declining 3.7 per cent month over month (m/m). The All Items Index has fallen 9.8 per cent from its near-term peak in April – just prior to the advent of financial market concern over Eurozone debt challenges. While significant, the commodity price correction remains mild compared with the 40 per cent plunge in the second half of 2008.

“Many exchange-traded commodity prices such as copper and zinc have edged up in November and are above the lows of early October,” said Patricia Mohr, Vice-President, Economics and Commodity Market Specialist at Scotiabank. “However, intensifying economic and credit concerns in Europe have contributed to renewed downward pressure on prices in the past week. As well, the failure of the U.S. Congressional Committee to agree on the details of a further deficit reduction package, potentially leading to sequestration – automatic spending reductions of US$1.2 trillion starting in 2013 over a decade – has added to uncertainty.”

The Metals and Minerals Index led the decline in October (-6.9 per cent m/m). Broad-based declines in base and precious metals – with an early-month selloff – and lower quarterly contract prices for Western Canada’s coking coal more than offset a moderate increase in overseas potash prices. The price of premium-grade hard coking coal for Asian sales declined from US$315 to US$285 per tonne (FOB Vancouver).

Iron ore spot prices delivered to Northern China may have bottomed, after plunging in September-October. Chinese steel makers have been cutting stocks of construction-grade steel. Prices rebounded to US$148-151 per tonne in mid-November (+20 per cent in the past several weeks). Potash prices (FOB Vancouver) also inched up to US$502 per tonne in October (+43 per cent year over year), as Canpotex and BPC implemented a price increase in Brazil and Southeast Asia. Given uncertainty over the global economic outlook, producers may hold off on additional price increases until next year.

The Oil and Gas Index eased by -0.6 per cent m/m, as lower Edmonton par prices for light crude and a further decline in Canadian natural gas export prices to the United States just offset firmer heavy crude oil at Hardisty, Alberta and stronger propane prices. Light oil prices at Edmontonhave rebounded in November to the US$95 mark.

Oil prices remain resilient. The spot price of North Sea Brent Blend - a world benchmark used to price some West African and Middle Eastern crudes – has inched up from US$110 per barrel in October to US$111 to date in November. WTI has jumped from US$86 in October to US$96 this month – with its discount off Brent narrowing. Prospective rail and pipeline developments will link new U.S. and Canadian oil plays to U.S. Gulf Coast refining centres, where international prices (Light Louisiana Sweet) prevail.

Pipeline and Rail Developments Alter North American Oil Market Dynamics

Spot WTI oil prices traded at only a slight discount to spot Brent (a world benchmark) in 2009 and much of 2010. However, the discount started to widen in the Fall of 2010, climbing to a record of almost US$30 per barrel on September 6, 2011 (also over US$29 in late September and mid-October). Oil flows from new developments were arriving at Cushing, Oklahoma, the pricing point for the NYMEX WTI oil contract, with limited pipeline takeaway capacity to refining centres on the U.S. Gulf Coast.

However, the discount on WTI has narrowed again to US$9-12 in mid-November alongside three developments:

Inventories at Cushing have dropped substantially from the April 2011 high (-23 per cent), with oil producers simply avoiding this hub and selling in other more profitable North American markets;
Rising rail shipments of Bakken light crude oil directly from North Dakota to St. James, Louisiana, diverting crude from Cushing; and
The November 16 announcement by a Canadian pipeline company that it will acquire a 50 per cent interest in the Seaway Crude Pipeline System and — together with a joint owner – will reverse its flow from Cushing to Houston (the largest refining centre in the United States). WTI oil prices jumped by US$3 to US$102.50 on the day of the announcement, though prices have since eased back to US$95.87.

“Despite these positive developments, Western Canada’s oil patch will remain vulnerable to the commercial risks from selling the bulk of its oil to just one key export market – the United States - a market likely to post slow growth at best in coming years,” noted Ms. Mohr. “This vulnerability suggests the need to build a transportation system to connect the Alberta oil sands to one or more export terminals on the B.C. Coast for onward shipment to the growth markets of Asia - China,Taiwan, South Korea, Japan, and the Philippines. Timing is important, as Alberta crude must be placed in Asian markets ahead of other competing international oil plays.”

Scotia Economics provides clients with in-depth research into the factors shaping the outlook forCanada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.

For further information:

Patricia Mohr, Scotia Economics, (416) 866-4210

Patty Stathokostas, Scotiabank Media Communications, (416) 866-3625

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RBC Dominion Securities to Receive Transfer of MF Global Canada Inc. Client Accounts

Written on November 26, 2011 by Baldo in Baldo Minaudo, The Banker Who...

On November 14, 2011 RBC Dominion Securities announced it had agreed to the transfer of client accounts from MF Global Canada Inc., whose parent company, MF Global Holdings Ltd. filed for Chapter 11 bankruptcy on October 31, 2011.

On November 14, 2011, the Ontario Superior Court of Justice approved the transfer of certain MF Global Canada client accounts to RBC Dominion Securities. Holdings in the accounts to be transferred include futures, equity and fixed income positions. This transfer will enable these account holders to access their accounts.

KPMG, the Court-appointed trustee in bankruptcy, and the Canadian Investor Protection Fund (CIPF) approached RBC Dominion Securities after the bankruptcy filing to request accommodating a bulk transfer of accounts and positions. RBC was approached given its strong balance sheet and commitment to the futures business.

“We have been working diligently with KPMG to secure the required approvals and resolve the matter for MF Global Canada clients,” said David Agnew, Head, RBC Wealth Management Canada. “We realize that the past two weeks have been very stressful for MF Global Canada clients. RBC Dominion Securities is happy to be in a position to assist.”

On Tuesday November 15, RBC Dominion Securities will begin proactively contacting clients of MF Global Canada and working with them to expedite access to their accounts.

RBC Dominion Securities has a robust infrastructure that can accommodate trading and hedging solutions across major markets for futures, options and commodities, including its own clearing capability for futures and options trading. This is in addition to disciplined investment management expertise in equities, fixed income and foreign exchange, as well as a comprehensive range of estate and wealth planning solutions.

Further information about the bankruptcy of MF Global Canada is available on the KPMG website kpmg.ca/mfglobalcanada, by e-mail mfglobalcanada@kpmg.ca, or by phone (416 777 3666 or toll-free at 1 866 602 6743).

About RBC Dominion Securities
With over 400,000 clients across Canada and worldwide, and $180 billion in assets under administration, RBC Dominion Securities is Canada’s leading full-service investment and wealth management firm for affluent and high net worth investors. While investment management is the core offering, our 1,500 investment advisors and portfolio managers also provide a full range of wealth management advice and solutions, such as insurance, retirement, estate and tax planning and charitable giving to help our clients preserve, grow and pass on their wealth. www.rbcds.com

For more information, contact:
Bev MacLean, Corporate Communications, RBC, 416-974-9334

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Are Real Estate Statistics Misleading?…Getting to the Truth Behind the Numbers

Written on November 10, 2011 by Baldo in Baldo Minaudo

If you read statements from some Canadian real estate boards it seems like homeowners have been fairing well over the last few years. So, when one of the MetroActive members who’s had to drop her rental income over the last few years in order to attract renters decided to list her home she was surprised that it was valued over ten per cent less than three years ago. She contacted us looking to understand what is happening.

Most people understand that a house is worth what someone is willing to pay for it. Realtors will tell you that location determines the price. But, what if the buyer’s not willing to pay what the realtor says the location is worth? Who’s opinion will win out? Well, if you were one of the buyers of the homes across from the South side of Casa Loma in 1989, the home you purchased for $1,000,000 (along with the dozen or so other similar homes on the strip) would have sold for $400,000 just a short year later.

According to statistics released by real estate board’s (mandated to serve realtors) and the Canada Mortgage and Housing Corporation (CMHC, mandated to promote home ownership) you would think that value of one’s home in Toronto has been increasing. So, why has more than one person not been able to sell their home for more than what it was worth just a few years ago?

In examining the value of a home, it is important to separate the value of the access to land from the actual structure for accommodation. In the case of a bungalow priced at $400,000 for example, the land could be worth $300,000 and the bungalow itself $100,000. In the case of our member above, her bungalow was valued at $430,000 a few years ago and now is valued at $380,000 at a time that the statistics show the average price of Toronto homes going up.

Most homes are depreciated at a rate based on a 60 year life span. That means that at 60 years that home should be torn down and replaced and they usually are. In the neighbourhood for the house above bungalows like her rental property of about 1,200 square feet have been replaced with two story homes of about 3,000 square feet. These more expensive homes start weighing the price statistics upward as they increase in numbers, increasing the “average price” of homes on that specific street. That is why realtors attempt to compare bungalows to other bungalows that have sold recently nearby, but what if there aren’t any bungalows like that which have sold in a similar street nearby? Well, they just keep looking until they find the closest comparable, which may not be comparable at all.

In looking at what’s happened in specific neighbourhoods, it was revealed that in situations where homes were not knocked down and replaced in the last few years and the price went up for those homes, they had been renovated. Over the last ten years there have been a number of organizations that have been showing, persuading and guiding people in how to buy, renovate and “flip” homes for resale at higher prices. These individuals have bought older homes and invested in some cases up to $150,000 to increase their value and resell them. The idea being that if they buy a $300,000 and spend $75,000 in renovations, then they could sell the home for $425,000 or more, and pocket the profit.

House flipping works well when real estate prices are rising and about five to ten years ago investors were making very attractive profits. Some of the more expert flippers started to realize that it was getting tougher to maintain their profit levels, so they decided to start teaching others to do it and charging them for it. As they recruited more and more real estate investors there were more and more flippers looking for homes that could give them a margin. With the economic downturn and sheer numbers of investors the profit margins decreased until the point where it is now rare to be able to flip homes in Toronto in that way and make money. Many of these investors have even found themselves losing money on deals.

This is the driver behind two important dynamics. First, if you’re comparing a renovated bungalow on the same street as a non-renovated bungalow, then it is going to be worth more if for no other reason the structure itself has been increased in value through the money you invested in it. Second, if you want to know whether true real estate values are going up or down you have to discount the first dynamic to get to the “land value”. That means that you take the value of the listed home, subtract the renovation and other expenses and that is the “land value”. It is only when you compare the land value that you can truly tell what is happening to real estate prices.

When these calculations were used in trying to understand what happened in the home value above, it all made sense. From examining other neighbourhoods around Toronto, including condominiums it was realized that in fact Toronto housing prices have been going down for a while. In the case of condominium prices, builders have been throwing in more and more upgrades, some even giving away trips and cars in order not to drop the price of new condominium units. But, if you take these incentives into account the true price of the units is much lower than the statistics show.

Did you notice the term used earlier, “average price”? Another dynamic of these statistics is that they don’t take into account specific types of homes, locations or other considerations. The averages are skewed by considerations such as the fact that only higher value homes are being built or put on the market for sale and that the lower valued homes may not even have many listings do to people not wanting to trade up.

Try these calculations for your own home and neighbourhood. If you can, follow the history of the homes similar to your own in your neighbourhood, their renovations, sales activity, etc. It is best if you can have a couple of examples to homes that were very similar to your own on your street. That’ll tell you whether your home value has been increasing or decreasing. Regardless, in the end it is the buyer that will determine your price. The end test of the value of what you have is what the buyers will pay for your home.

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