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September 2017 Newsletter

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“There will come a time when it isn’t ‘they’re spying on me through my phone anymore. Eventually, it will be ‘My phone is spying on me’.”
― Philip K. Dick

“I know there’s a proverb which says ‘To err is human,’ but a human error is nothing to what a computer can do if it tries.”
― Agatha ChristieHallowe’en Party

All of the biggest technological inventions created by man – the airplane, the automobile, and the computer – says little about his intelligence, but speaks volumes about his laziness.
― Mark Kennedy

 

Contents

  1. IR and Technology
  2. Smoldering Fires and Tax Reform (Just an Opinion)
  3. A World in Turmoil
  4. Interest Rates and the Canadian Dollar Mean An Early Christmas for IR Clients
  5. Tennessee, Memphis and Nashville

IR and Technology

As most of you know, we have been working to automate a number of the processes at IR. Our filling system has been redesigned and standardized, and we have an accounting and inventory system of some significance. We have also implemented a work flow system that will auto-generate certificates. It draws from a data base, which means that mistakes caused from entry errors are almost nonexistent.

Technology does, however, cause its own problems. Our database system has been overwhelmed by the volume of data we have accumulated over the last year and a half. This has slowed the process and is extremely frustrating. Never a quitter and always looking for the best way (see Mark Kennedy’s quote here), we have invested in the development of a new platform. This platform is meant to to handle all of our needs and increase speed and carrying capacity to the point of it “never being a problem again” (I’m rolling my eyes).

We are very happy with the workflow and its advantages, so much so that we are going to add it to most (if not all) departments at IR. Our own experiences will be used to create many more advantages for our clients. We hope to share these advantages with you in the very near future. I guarantee you what we have planned will be nothing short of amazing.

 

Smoldering Fires and Tax Reform (Just an opinion)

Over the last several years, there has been a smoldering fire that is slowly spreading. It’s being debated at work and in lunch rooms. It’s being debated around the after-hour sociables at local taverns, and at dinner tables. It is part of a larger wildfire that has spread to developing and developed countries alike all around the globe. In some places, it has erupted into infernos that have changed political landscapes. In others it just waits, creeping through the underbrush.

Here in Canada, it has sprung up as a political change; social issues that have trended into the forefront of our political system. This movement has been called several things, such as fascism and communism. In reality, it is none of those things. However, it is a significant shift and it is happening everywhere.

Most recently, our own smoldering burn pile has flared up in the form of tax reform. Our finance minister has decided to close some small business “loop holes” that have been seen by some as unfair advantages for small business owners. This flash flare-up could ignite a full scale blow-up and may spark a significant change. This change could cause even greater polarization of our social and political ideals for some time to come.

The threat is that even small business owners will fall into the category of “abusers of the system;” That they are looked upon as part of the problems perpetrated by the “one percent”.

Small business owners are the backbone of our democratic economies. They invest in our communities; they are the trees that make up the substance in our economic forest. The Amazons and Apples of the world are the giant sequoias, important in their own majesty, creating micro-economies and projecting national and global influence as they eat up the forest floor around them. However, the average business is what the forest ecosystem revolves around. It’s where the sequoias sprang from and it is where they get the nutrients and intellectual resources needed to sustain them.

Large corporations are the worst innovators. It is small businesses that take the risk in developing new ways. It is small businesses that transform these new ways into viable business opportunities. The large corporations feed off of these new start-ups. It is here where they add to their own growth through acquisitions and mergers.

I’d like to make it perfectly clear: the tax items being debated right now are not loop holes. They are intentional tax breaks to foster, protect and promote small business, including family farms. Much has been written about the effects of Bill Morneau and the Justin Trudeau liberal tax plans, good and bad. However, the very health of our social and economic system in Canada is what is at stake.

It is very apparent that the tax system is out of date and in need of reform. The tax incentives right now may not be the best, but unless some other incentives are in place, the small business community will be stunted.

Under these new reforms, the forest may eventually turn into a barren landscape of a few towering old growth giants. Or, in the best case scenario, the forest will succumb to slow, rotting decay, dragging the Canadian economy along with it.

Politicians are shamelessly using every conceivable trick in the book to try and capture votes – without one thought to how this kind of sensationalism is promoting the trend towards protectionism (think Donald Trump here). No stone will be left upturned if it garners a vote. The notions of inequality and unfairness have been used in every campaign. Words like unfair, loop holes for the rich, the one percent and patronage are the keys in statements promoting distrust and even hate. We are better than this.

No one should ever underestimate the power and the importance of small business. They are the innovators of the good and the bad. They promote competition, keeping prices reasonable. The reason small business is such a high risk affair is because very few new ideas ever pan out. However, while they are in business, the small businesses often drive prices down and keep even the giants competitive. Sometimes, new ideas work out and that is when everyone takes notice; but it is the failures that help keep the rest honest.

Only the strong survive, and that is the way it should be. The law of the jungle. A new shoot springs up and the rest of the forest does little to encourage it. In fact, they often try to destroy it.

A new business must have customers, just like a sapling must have light; if it isn’t positioned properly it will wither and die. It is wrong to artificially support start-ups by clear cutting the forest, but some pruning here and there will help it flourish. Supporting the healthiest saplings will also eventually support the forest as a whole.

Small businesses need to be encouraged, and tax incentives are a great way to do this. I don’t necessarily support the current tax breaks. Sprinkling of incomes to family members was done to benefit family farms. It does nothing for the single entrepreneur. Passive corporate investment income, however, can and is being abused by some professional services, so let’s change that instead.

However, we must be sure to have something to replace the policies with before we just mow the forest floor. Let’s not use them to stir a fiery protectionist movement just for the sake of votes. It is not wrong to make money, in fact it is required.

The needs of business owners (from start up to retirement, income to profits, succession or sale) need to be looked at. A modern tax plan needs to be developed. But this is the way it used to be. Now, everything needs to have a line drawn – have someone to blame. Burning passions created bombastically over imaginary lines however, draw votes.

 

A World In Turmoil

We have been talking to friends and associates in BC, Houston, and now Florida, where wildfires and hurricanes are tragically real life events right out of a Hollywood horror movie. I can’t imagine the pain and anguish those affected must be going through.

An 8.1 quake in Mexico and another storm, Jose, brewing in the Atlantic have all got us wondering what we can do to help. All I can say is be careful: phishing scams are starting to pop up, so donate to well-known foundations and charities through equally well-known channels.

There are those who think that this type of environmental destruction creates future growth because of the jobs created to repair the damage. Unfortunately, the cost is ultimately high, and destroying your perfectly good infrastructure with the idea that rebuilding it is a boom to the economy is false. This could be the trigger that pushes the US into thatcyclical recession we have all been wondering about.

The weather is one thing, but it seems that Russia, China, the US, and Europe (among others) are all jockeying to maintain their relevance as well as protect or project their self-interests. A lot of pushing and shoving is going on. We need to keep abreast of the importance of these gyrations and especially how it affects commodities and the Canadian economy.

Interest Rates and the Canadian Dollar Means Early Christmas for IR Clients

Our central bank, the bank of Canada, has been steadily increasing interest rates. The economy is improving as GDP has risen beyond expectations, however, inflation has not. I am always amazed by the numbers we get related to GDP and unemployment. I have no explanation, just wonder.

For instance, before the fall of oil prices, we would advertise for a position and get 1 or 2 resumes. Seriously, 1 or 2. Now we advertise and we get somewhere between 500 and 800 resumes? Hmmm. Alberta is hovering at about 8% unemployment (it was 7 something before the oil crash) and the national average is about 6.5% (a point below what it was before the oil crash). Seems odd but what do I know?

I believe that interest rates are headed up to try and stop the overheated housing market, private borrowing, and subsequent indebtedness. We have reached 95% GDP public debt level, and private debt has increased year over year; it is now 165% of income. Mortgage debt is huge, but home equity loans may be even bigger. Poloz is hoping he can slowly defuse a ticking time bomb, but he may just be speeding up the inevitable.

The original idea was to lower savings rates by lowering the Central Bank rate. This was done in hopes that investment would flow out of savings accounts and into the economy. Well it worked, as savings rates are close to an all-time low- even in an aging baby boomer society.  Low interest rate policies have created housing bubbles and spending sprees because they made money almost free.

So the idea now is to slowly pull the drugs away from the drug addict and hope that they can handle the withdrawal. Anything is possible – I’d be prepared for any scenario. There’s liable to be a tipping point; the world is in one big experiment right now.

The one good thing coming out of this is that the Canadian currency is gaining against the USD, which is allowing IR to chop some prices as inventories roll over. You will begin to see some significant price decreases if you have not already. Word of caution: in our opinion, we do not think it will last. We feel the US dollar has perhaps fallen close to its bottom, so perhaps you should get, while the gett’in is good?

Under these new reforms, the forest may eventually turn into a barren landscape of a few towering old growth giants. Or, in the best case scenario, the forest will succumb to slow, rotting decay, dragging the Canadian economy along with it.

Politicians are shamelessly using every conceivable trick in the book to try and capture votes – without one thought to how this kind of sensationalism is promoting the trend towards protectionism (think Donald Trump here). No stone will be left upturned if it garners a vote. The notions of inequality and unfairness have been used in every campaign. Words like unfair, loop holes for the rich, the one percent and patronage are the keys in statements promoting distrust and even hate. We are better than this.

No one should ever underestimate the power and the importance of small business. They are the innovators of the good and the bad. They promote competition, keeping prices reasonable. The reason small business is such a high risk affair is because very few new ideas ever pan out. However, while they are in business, the small businesses often drive prices down and keep even the giants competitive. Sometimes, new ideas work out and that is when everyone takes notice; but it is the failures that help keep the rest honest.

Only the strong survive, and that is the way it should be. The law of the jungle. A new shoot springs up and the rest of the forest does little to encourage it. In fact, they often try to destroy it.

A new business must have customers, just like a sapling must have light; if it isn’t positioned properly it will wither and die. It is wrong to artificially support start-ups by clear cutting the forest, but some pruning here and there will help it flourish. Supporting the healthiest saplings will also eventually support the forest as a whole.

Small businesses need to be encouraged, and tax incentives are a great way to do this. I don’t necessarily support the current tax breaks. Sprinkling of incomes to family members was done to benefit family farms. It does nothing for the single entrepreneur. Passive corporate investment income, however, can and is being abused by some professional services, so let’s change that instead.

However, we must be sure to have something to replace the policies with before we just mow the forest floor. Let’s not use them to stir a fiery protectionist movement just for the sake of votes. It is not wrong to make money, in fact it is required.

The needs of business owners (from start up to retirement, income to profits, succession or sale) need to be looked at. A modern tax plan needs to be developed. But this is the way it used to be. Now, everything needs to have a line drawn – have someone to blame. Burning passions created bombastically over imaginary lines however, draw votes.

Tennessee, Nashville and Memphis

The end of October brings the Fall ANST conference and exhibition, and this year it is in Nashville, Tennessee. Almost religiously, a number of us attend the conference and we also often bring our wives. This year will not be the exception; in fact, the wives are insisting they come along and have decided a side trip to Memphis is in order.

A visit to Graceland and Beale Street is not an option, but a necessity. The trip has been planned the weekend before the ASNT conference. If you are interested in tagging along with us, drop me an e-mail at brian@irss.ca, and I will include you in our plans for accommodations and reservations.

We are not planning on many days in Memphis- just a day or two before we’re off to Nashville. It is likely we will take some form of group transport like a rental bus, limo, or van. It’s a 3 hour drive or so. We thought it might be fun to fly to Memphis and then drive to Nashville. The more the merrier.

I will close now with a last comment as this letter has gotten rather long. At IR, we record and investigate every comment made to us by you. It is how we improve. It has been estimated that only 20% of client problems are relayed back to the service provider. We do get very few but I know we are not perfect. Please, if you do have a comment let us know. We do take them seriously – and thanks again for your patronage. You can contact anyone at IR, but Jessica’s inbox (Jessica@irss.ca) is where they will end up.

And remember,
For the unknown there is NDT,
For NDT there is IR.

Cheers!
Brian Sargent

 

I think NDT, therefore, IR.

 

Our mailing address is:
8108 McIntyre Rd
Edmonton, AB
T6E 5C4
(780) 452-4761

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