Oaken Update – July, 2017

Two big moves to usher in a new dawn

If you’ve been following the financial news lately, you’ll know that our parent company Home Capital Group has been busy making a number of important changes. This includes the emergence of two key individuals in particular, who will play a pivotal role in ensuring a successful future for the company.

World-renowned backing

The first of these probably needs very little introduction. The person behind Berkshire Hathaway’s recent investment in Home Capital is none other than Warren Buffett, who is easily the most famous investor in the world today. The legendary “Oracle of Omaha” is an icon of the investment philosophy known as value investing, which buys shares that are priced less than their intrinsic value. He was one of the first people in the world to become a billionaire, and the annual meeting of Berkshire Hathaway has attracted more than 20,000 people at a time—earning it the nickname “the Woodstock of capitalism.”

Buffett became interested in Home Capital after receiving an email from a friend in Canada, who recommended the company for his portfolio. After taking a closer look, he made a commitment to Home Capital that included a $2 billion line of credit and the possibility of owning up to 38% of its stock. In his own words: “Home Capital’s strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment.” You can read an interesting article from the Globe and Mail about Mr. Buffett’s decision to invest here. Given his buy-and-hold approach to investing, Buffett’s name is expected be associated with Home Capital for a long time to come.

Strong new leadership

The second person we’d like to introduce is Yousry Bissada, who was recently appointed as the new President and Chief Executive Officer of Home Capital Group, and will be officially taking the reins on August 3, 2017.

As outlined in the press release, Yousri is an experienced and highly respected leader in the Canadian financial services industry, with a career that spans more than 30 years. His background includes senior executive positions with both TD Canada Trust and CIBC. He also served as CEO of Filogix, which is one of the most important providers of technology to the mortgage industry. More recently, Yousry was President and CEO of Kanetix Ltd., a company that works with financial services firms to help them improve their digital tools and technology, including one of Canada’s largest online platforms for sourcing insurance quotes.

In addition to several other qualities mentioned in this article by the Toronto Star, Yousri has established a reputation for excellence in customer service throughout his career, and we’re delighted that he’ll be continuing our Oaken commitment to delivering the best service possible

Interested in interest rates?

It’s the one finance-related topic that captivates us all, whether we are borrowers or investors: what’s happening with interest rates?

Well, there was no surprise from the Bank of Canada this month. After years of ultra-low interest rates, Bank Governor Steven Poloz finally pulled the trigger and raised the cost of borrowing for everyone. It wasn’t a big jump—only 0.25%—but it was highly symbolic. To understand why, just consider the history of interest rates over the past decade. On July 10, 2007, the rate sat at 4.50%. By April 21, 2009 (less than two years later), it had plummeted to an all-time low of 0.25%, and it stayed there until June of 2010. Over the next seven years, it rose no higher than 1.00%.

That’s an extraordinary history. For the past two years, the bank’s overnight rate has been at 0.50%—a huge stimulus for economic activity. And while the days of low-cost borrowing aren’t gone yet, it’s expected they will be soon. Our economy is strengthening, and barring any unforeseen shocks, rates finally appear to be on the upswing.

The silver lining

Rising rates aren’t altogether a bad thing. Sure, low rates make it easier to buy and borrow. But when you look at the overheated housing markets, particularly in Vancouver and Toronto, rising rates can do a lot of good by cooling demand and bringing house prices back down to earth. And rising rates are also good for savers. As many of you know, returns on fixed-income products like bonds and GICs have been painfully low for seniors and others who are risk-averse. Higher rates will finally provide some relief.

At Oaken, we never make specific predictions about things like interest rates. But we can offer general suggestions when trends like this begin to appear. If you are a borrower, you should be aware that your costs are likely to go up over the next while. We advise all our clients to take a careful look at their finances, and make sure that they have some margin in their budget for higher payments, which are likely here to stay.

Four tips for keeping fit—without exercising!

We all know that exercise is the best way to burn calories, and is also the key (together with diet) to managing body weight. But sometimes you’re just crunched for time, can’t make it to the gym, or just want a break from the old routine. No problem—there are still some very easy ways to keep slim and trim. Best of all, they’re the kind of thing you can easily integrate into your daily life for an added “burning bump” when you do get back to the rowing machine.

   1. Drink caffeine.  As a stimulant most commonly found in coffee and black or green tea, caffeine can increase the calories you burn. Part of the reason may be that caffeine makes you think you have more energy so you move more, and part of it may be that it provokes metabolic changes in your body. Just 250 milligrams of caffeine with a meal has been shown to increase calories spent metabolizing what you ate by 10%–a small amount that adds up over time.

   2. Eat breakfast.  While evidence is not absolutely clear, it appears there is a link between skipping breakfast and increased body weight. Skipping breakfast means fasting for 15 hours or more, during which time you’re not producing the enzymes you need to metabolize fat. On top of that, missing breakfast can also lead to eating more calories later in the day, because by the time lunch and dinner roll around you’re much hungrier than you would be otherwise.

   3. Go for calcium.  Calcium doesn’t burn calories, but it seems that it can discourage the accumulation of fat. Specifically, the calcium found in dairy products may inhibit the transport of fat from the stomach into the bloodstream, according to a recent study from Denmark. Other research has found similar results, so it’s probably worthwhile to include foods like low-fat yogurt in your diet from time to time.

   4. Fidget.  Twiddling your thumbs, tapping your toes, even rocking to music takes energy—and that means they must burn calories as well. What’s surprising about fidgeting is just how effective it can be. Some studies have shown that regular fidgeting can burn up to 350 calories a day, which translates into 10 to 20 pounds over a year. And it also appears that lean people tend to be more fidgety than others. So relive your early school years, and get back to fidgeting!

Thanks for helping us stand for all Canadians

You may have noticed the advertisement that Home Capital Group ran in many newspapers across the country a few weeks ago. In case you missed it, you can view a copy of this by clicking here.

This ad reflects an important point that we touched upon in last month’s Oaken Update. Home Trust has been providing mortgages to thousands of deserving Canadians over the past 30 years, helping them achieve the goal of home ownership which may have otherwise been challenging. And it’s the money deposited in Oaken GICs that goes directly towards funding the mortgages for these homes, turning that dream into a reality for many people.

So once again, we just wanted to express our gratitude to all our customers for playing your part in helping fellow Canadians, and enabling further growth and prosperity for our nation.

Reading corner

The laziest days of the year are here, so we’ve got some light fare to help you snooze in your hammock…


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