ABCtech #31 11Jan15 Why Doesn’t Alberta Diversify

ABCtech #31 11Jan15 Why Doesn’t Alberta Diversify

QuikTech Notes 11-JAN-15 Welcome 2015 – What A Week        

Memberships HERE

Technologies and issues of commercialization dominated the news. Debate continued on regulating the exempt investment market. The Consumer Electronics Show reinforced the prevalance and ever increasing power of apps. Oil price declines, hope for Keystone XL’s approval and diversification were revisited. We received some very timely editorials.

Why Doesn’t Alberta Diversify? – an ABCtech Editorial

In 2005, the Alberta Council of Technologies Society was incorporated to advocate for “Diversifying Alberta’s economy through the commercialization of emerging technologies.” Some argued against our vision stating, “One hour spent diversifying Alberta’s economy is one hour less for producing oil revenue, providing for Alberta health and education.” – Alberta Oil Industry Executive
 
And as recently as this past summer, “It’s not an Innovation Zone that we need but a commitment to capitalize on the Region’s proximity to the oil sands.” – Economic Development Executive
 
And now in 2015 – with the price of oil collapsing again, we hear, “Our dependency on oil will be replaced by our addiction to innovation.” – President & CEO, Edmonton Economic Development, reinforced HERE as Edmonton was recognized as an Innovation Centre.
 
“Time to dust off the old bumper stickers promising not to piss away yet another oil boom?” Editorial: Edmonton Journal (January 7, 2015)

The sentiment was echoed in Bob Fessenden’s recent editorial HERE and repeatedly in annual assessments we have solicited since 2010 on the diversification of Alberta’s economy:

         2010 – Jason Bisbois, U Alberta
         2011 – Peter Hall, Export Canada
      2012 – Todd Hirsch, ATB
      2013 – Leo De Bever, AIMCO
      2014 – Richard Truscott, CFIB

More recently at an Edmonton luncheon of 100 engineers, not one hand was raised when the audience was asked “Do you believe Alberta’s economy is adequately diversified to weather a downturn in oil revenues?”

When we asked a former Premier for an explanation, the response was, “Downturns never last long enough to trigger a serious approach to diversification.”

And when another Premier was asked, “What process should Alberta consider to prepare for a post-carbon economy?” The answer was “We’d invest in energy, forestry and agriculture.”

What are your thoughts? Here some thought starters:

1. First, we need a credible, data-based scorecard, an economic weather report, on the status of diversification, more than just anecdotes and publish it regularly
2. Respect small technology enterprises. Resolve the high failure rate of the engine of innovation and the propensity to export successes. Resolve the red tape and overly aggressive taxation procedures that suffocate small business. See our 2014 Report on “Why small technology businesses fail to grow.” HERE
3. Establish a Task Force of respected, independent thinkers in creative financing. Large investment funds and foreign financing of Alberta’s future have not stirred innovation. Explore creative financing measures and formation of a legion of brokers for engaging Albertans as investors in emerging enterprise anticipating the baby-boomers $T wealth transfer.
4. Establish an Independent Technology Industry Advisory.  Investing in oil and oil-related industries only deepens the dependency on oil. Alberta is already well positioned to capitalize on advantages in several areas: cleanTech and alternative energies, nanoTech, healthTech and Analytics.
5. Finally, we need sustained leadership, leadership prepared to withstand fickle markets and voters – a voice, committed to a vision founded on a policy of diversification, a vision that is more than a “fat piggy bank”.

TALENT FIND

Strategical, creative, innovative and results driven business professional with 10 year track and experience in public affairs,full communications cycle, PR, stakeholder engagement, strategic partnerships, media relations and client development across the legal services, banking, media, e-commerce, technology and energy sectors in the EU, UK and Australia.  Seeking opportunity in Alberta. FOR MORE

Can big data predict market trends? by Ryan Thomas, Slap-up Media

With the new year in full swing, marketers everywhere are looking forward to the newest trends across a variety of industries. While rigorous research has been taking place throughout 2014, some techniques have been proven to be more effective than others – in particular, using ‘big data’ to predict market trends.

The term ‘big data’ comprises large sets of data which can be analysed by a computer. The analysis helps to determine patterns, trends and associations, which can then in turn be used to relate to human behaviour and interactions. Within these behaviours and interactions, the data can help us predict which products will be popular in the future – but how does this work?

One way in which the service has been proven to be effective is through predicting stock market trends.

At the end of last year, economists from universities across the UK and Boston published an article on Google Trends data – see HERE, showing that huge amounts of data were essential in predicting daily price moves in the Dow Jones industrial average

An uptick in Google searches on finance terms reliably predicted a fall in stock prices. ‘Debt’ was the most reliable term for predicting market ups and downs. By going long when ‘debt’ searches dropped and shorting the market when ‘debt’ searches rose, the researchers were able to increase their hypothetical portfolio by 326 percent. (In comparison, a constant buy-and-hold strategy yielded just a 16 percent return.)”So if big data can predict something as unstable as the stock market, how else can it be helpful? One area that has proven to profit from the data gathered is the online gaming market: this is one industry that has grown exponentially year on year since its beginnings in 2003. The data speaks for itself; according to Statista, the online gaming market has grown in revenue from $7.4 billion in 2003 to $41.4 billion in 2015.

These statistics are pretty helpful where the online gaming hosts themselves are concerned. Sites such as Gaming Club are taking the data on board and in turn catering their products to new markets, courtesy of help from such data gatherers as Google.

As the biggest player in the search engine industry, Google is always bringing out complex algorithms to analyse the newest markets. With its help, there is no denying just how many businesses can prosper with this improved market research in the future.

Exempt Markets: Regulatory Framework Needs Careful Study by Jack M. Mintz – the Palmer Chair and Director, School of Public Policy, University of Calgary.

When Mr. Jim Turner, Vice-Chair of the Ontario Securities Commission, issued‎ his open letter criticizing my views on exempt security markets, I knew that my paper published by University of Calgary’s School of Public Policy hit a raw nerve. It is not often that an academic receives this type of attention. If the end result is a better look at this significant part of Canada’s capital markets, so much the better.  My main points were threefold.

First, the exempt securities is large — both primary and secondary offerings are more than those in public markets. It plays a role in funding large institutional offerings as well as those issued by many medium and small businesses. The problem is we do not know much about the performance of the market — the data collected by regulators are poor so much so that we are not even able to judge the size of the retail and institutional parts of the market. Without better data, we do not know if the market performs well or badly — fraudulent behaviour, for example, happ‎ens just as in public markets but we do not know if the frequency is more or less.

This gets to my ‎second point. The current approach to regulation in the market is to identify “sophisticated” investors eligible to hold securities who have sufficient financial knowledge to understand the risks. However, “sophistication” is based on thresholds related to financial wealth or income — a rather imperfect measure since many high-income Canadians such as medical professionals and engineers may know a lot about their own specializations but have little financial literacy. Further, to really understand an investment, is critical for investors to have certain initial and ongoing financial information to judge returns and risk. The Offering Memorandum regime in most provinces provides some requirements with respect to financial information. Ontario is looking to catch up with other provinces in adopting this regime for a broader group of investors.

This regulatory regime leads to my third point. Given the lack of information about the markets, we cannot judge whether the current regulatory approach is appropriate or not. Ontario is proposing new rules that have not been adopted elsewhere especially with respect to a $30,000 limitation on investor participation in an issue. This regulation has not existed in Alberta, BC or Quebec in their Offering Memorandum regimes and, given the lack of performance data, we do not know whether this regulation addresses a problem that needs to be dealt with or not.

As I point out in my paper, the $30,000 cap could do more harm than good. It makes it harder for larger, better operated companies to raise capital since they will need to spend resources to find more investors. This will hurt the performance of the exempt securities markets by making it easier for poor quality projects to seek funding in the market, increasing the cost of information.

My point is that the regulators with new rules can do more harm than good. They need to understand the market better and determine the appropriate regulatory framework. Certainly, regulations are not the only policy to consider — enforcement is important too.

This important exempt securities market needs review and, in my view, a new approach to regulation ‎might be worthwhile once developing more evidence. For those who participate in the market, any measure that effectively builds confidence is something that should be welcomed by participants.

Exempt Market Viewpoint by Peter Kinkaide, Managing Director: Raintree Financial

Dr. Mintz is right, echoing industry”s viewpoint. As a market participant, we’re glad to have an independent voice.

We are sympathetic to the role regulators play, but it is hard to identify what research and data analysis are being completed by/for policy makers to develop this new regulation. If it is available, we would be keen to gain access to it as it would very likely assist market participants for improving their business practices.

Regulators have a fine balance to play in protecting investors, while allowing markets to remain efficient and effective at stimulating capital growth. The baby should not be thrown out with the bath water. In the most recent proposal on NI 31-103 there were elements that we are in favour of – that can meaningfully protect investors. This included enforcing annual financial audits as part of ongoing reporting and including marketing as part of the Offering Memorandum, affording investors certain rights against misrepresentations.

Regulating the amount individual Canadians can invest, constitutes overreaching interference. I believe there would be a litany of unintended consequences to impose a cap on investments. This key topic seems not to have applicable research as to the effects of this proposed legislation, the utility of taking these type of measures or frankly what the measure is protecting against.

The principle of “suitability” should be first and foremost – that imposes an obligation to sell only what is suitable for an investor. Regulating the seller implies that regulators do not trust dealers to do a proper job for clients. Again, there may be data or reason for them to have taken this stance.

We believe that independent Exempt Market Dealers should have greater flexibility than issuer-based Exempt Market Dealers with inherent conflicts. The reason for this is that the incentives and conflicts are rearranged for a vertically integrated investment dealer. In fact, I think this is an area that big banks should be pushed further in a effort to create full disclosure of their inherent conflicts that unwitting Canadian’s are subjected to daily (notably this does seem be being addressed in CRM2, regulation currently being enforced by the regulators).

As for the industry, if Canada wants to support its own Mittelstand (German for medium size business – a thriving market in Germany), then the private capital markets are where you do so from a financing perspective. Capital formation in the public markets is too expensive, too onerous and provides too little benefit (in the form of liquidity) for companies with market capitalizations below $100 million.

Private investments are inherently riskier than public ones, but the risk comes with the potential of outsized returns. A properly diversified portfolio should be able to withstand such risk, if the client can too.

TALENT FIND

I am looking to connect with dynamic technology, niche and or innovative companies/organizations at growth stages. I am seeking projects that delve into new areas or disrupt old ones, led by people that are serious about moving their projects forward. I am also interested in technology commercialization projects within the entrepreneurship eco-system.  Areas of impact:

1. Project leadership, 2. Client discovery/user experience/ traction/engagement , 3. Business strategy/market development. FOR MORE