Meet Jack, the man who’s got your money on his mind. Jack Blacksmith has become well-known to Crees as the Grand Council’s point-man on forestry issues. Last summer, his and others’ efforts paid off with the filing of the $700-million-plus Cree lawsuit against Quebec, Ottawa and the forestry industry.
On December 10, Blacksmith took on a new, equally challenging job as chairman of the Board of Compensation and CREE CO. The two-year appointment comes at a tough time for CREE CO., which reported a loss of $7.55 million last year and a soaring accumulated deficit of $31.7 million. Blacksmith doesn’t come to the job without experience. He’s been Waswanipi’s representative on the Board of Compensation for over seven years, most recently serving as vice-chairman.
In this interview, Blacksmith talks about a wide range of issues affecting your money. How are Cree heritage funds invested? How badly did the Bre-X crash and last year’s global financial meltdown hurt Cree investments? What’s behind the financial troubles of CREE CO.?
He also wants to finally hire more Crees at the Cree companies (where only one in three employees is now Cree), and says CREE CO. is open for business with Crees and ready for fresh ideas.
The Nation: How much money do you manage?
Jack Blacksmith: As of December 31, the Board of Compensation had approximately
$98.311 million in funds. Out of that, we have a Growth Fund of $32 million. The revenue of that fund is never touched. The money managers leave that revenue in there to make it grow and it is held in stable investments.
One of the things the Board of Compensation realized a few years ago was that our purchasing power was diminishing from year to year. And our children and our children’s children wouldn’t see very much of the funds. So we said, let’s try to do something to offset that.
We initially invested about $15 million in the Growth Fund in the late 1980s, but we’ve added to it since then.
How is the rest of the money invested?
We try to find the maximum return, the best out there, so we don’t lose our shirts. We give our investment policy to our money managers (Guardian, Tal, TD Index Fund and Griffon Shift Fund), so they know we want so much in stocks, so much in cash and so much in bonds.
We’re creating an investment committee right now which will have more of a hands-on approach to the investments. Sometimes things happen too fast out there and the board can’t meet in time to make a decision.
What rate of return do you aim at?
It’s not so much of a target rather than trying to stay just above the market return. The money managers are telling us anywhere from 6 to 9 per cent is the thing to look at. We compare the markets to what our people are doing. And with the investment committee, these guys will be really on top of the money managers. They’ll monitor their progress.
What return do you expect this year?
This year we’re looking at approximately 7.5 to 8.5-per-cent return for the 1998-99 fiscal year.
What do you see in stocks in the coming year?
Our money managers are telling us the market is probably going to stabilize itself. But it’s not going to go up to where it was before July. They’re telling us it should settle down. But they’re telling us also that there are some companies that have overburdened the market (control too much of the market -Ed.) When you’re in that situation and something drastic happens to that company, the whole market is going to be affected. Whereas if you have a pretty level field, when one company has a bad situation the market is able to ride that along with no problem.
What the guys are telling us is the market is a little overrated in terms of stocks. But, yes, they’re telling us the stock market will probably be fairly decent for us this year.
Did the financial meltdown in Asia, Brazil and Russia have an impact on the Cree funds?
Our money managers say the Russian crash doesn’t affect the markets that much, not as much as the Asian problems. When things go downhill there it really affects the markets. I’m not sure to what extent we have investments there, but, again, I come back to the investment committee. That’s what the committee can really look at. When they see things start to happen, they can make that decision before the situation gets really bad.
Do you see a recession coming up in the short-or medium-term?
Money managers are always telling us a different story. One will tell us a real scary story and the other one comes in and it’s a whole different thing altogether; it’s all smelling like roses. It’s very hard to tell. Nobody has that magic
crystal ball. If we all had crystal balls, we would have all bought into Microsoft when it was at $2. We’d all be walking around millionaires. Even with Bre-X, we would have all bought shares and sold them when the crash came. We didn’t know when the crash came and a lot of people lost money.
Did the Crees have money invested in Bre-X?
We didn’t lose a lot of money. I think it was probably $100,000 or $150,000, somewhere in that neighbourhood. We had to write it off as a loss.
Do you find it’s becoming more difficult to meet the needs of the entities and communities at the same time as the returns aren’t increasing?
Yes. For sure. You just hit the nail on the head. The funding needs of the community organizations, communities and regional organizations are increasing every year. But our level of revenues don’t grow at the same level. That’s a real problem for us. How are we going to fund all these things? There’s a real lop-sided effect there.
Is it hard to be head of both the Board of Compensation and CREECO.?
It is. It is very difficult when you consider what’s happening with these companies. But you’ve got to remember the situation in terms of how this came to be. When CREE CO. was first created, it had its own board of directors.
Back a few years ago, there was a problem in terms of making decisions. A lot of people, in my opinion anyway, made decisions without proper authority, without proper notice to the entire board, because the board was never able to meet; it never had quorum.
So the Board of Compensation, as the owner of CREE CO., took over the whole operation.
With CREE CO., how do you see its situation? Do some changes need to be made with the way it’s run?
We’ve been doing that in the past couple of years. For example, we’re thinking of taking the salary or pay operations of each entity and putting them in a Cree community. Maybe you can create a few jobs when you combine the payroll of those companies. That’s the kind of thing we can look at.
But the biggest thing is we Crees created these companies, and we Crees don’t use them to the extent that we should. For instance, Cree Construction – I realize it’s made a name for itself in all the Cree communities. With all the contracts that are happening in the communities, I don’t think Cree Construction got 15, 20 per cent of those contracts. Cree Construction gets most of its contracts from outside (the communities).
Also, take the food wholesaler, Servinor. Again, we sell to some communities, like Wemindji and Waskaganish, a little in Eastmain. But other places are hard to get into. They’d rather give their business to other wholesalers.
I read that Air Creebec is considering buying Air Alliance.
Air Alliance is having difficulty in its operations. Air Canada owns 100 per cent of it. There are a lot of people looking at purchasing Air Alliance and we were also there. Other than that, I can’t tell you any more at this time. It’s still under discussion.
Afew years ago we published a study that was done for the Grand Council, which said if the money that had been put into CREECO. by the Board of Compensation was invested in stocks instead, it would be worth a lot more today. What do you think about this?
I’ll tell you this. Hindsight speaks best in anything we do. Whoever was part of that decision in creating CREECO., they saw an opportunity in saying, let’s start an airline for our people. Crees agreed to that. Cree Construction was created again by Crees seeing an opportunity, saying there’s going to be lots of construction in the Cree communities; we can capitalize on this by creating our own company.
The objectives and goals of the communities have changed. They’re trying to set up their own companies now and capitalize at their own local levels.
When you say we could have taken our money and invested it somewhere else and made more money, for sure, I agree with you 100 per cent. But that decision was made a long time ago to start these companies. We have to live by it. We have to try to create something of it.
Around the same time, there was another study about hiring of Crees in the companies. At the time, one in three CREE CO. employees was Cree. Has the situation improved?
I don’t think it really has improved that significantly. But we really want to establish a Cree basis to hire people. That’s a must. That’s an objective we’re going to have to start bragging about in the next couple of years. Not only labour type jobs. But full-time administration jobs. Jobs that are permanent and not only based on seasonal construction. We have talked to all our presidents and managers. We told them the moment you think of hiring someone, you’ve got to think brown.
We are also looking at various programs to try to do this. The Board of Compensation is looking at starting a Cree Youth Development Strategy Program over a 12-year period. We have jobs that need to be filled – controllers, clerks, chief accountants, maintenance foremen. We’re saying to the youth, here are the opportunities. If somebody can come and replace this individual over the course of a few months, we’ll take that individual. We’ll train them. For instance, right now our financial analyst (Janie Pachano) is resigning and we said there’s no way we’re going to hire a white person for that job. We’re going to hire a Cree, maybe a recent graduate, and we’re going to offer them training.
We should be very sincere about this and start putting down the positions that can be made available for those students.
Did you have anything else you wanted to point out?
Maybe the situation with some of our companies. We’re open to ideas here in trying to get business for them from the local communities. We know there’s a lot of potential for business, especially regarding food and construction. We’d like to open the door for people to make all sorts of suggestions.
Is there a reason some of the communities have been less reluctant to do that and is there something that can be changed to open that up?
I think Cree Construction has made a name for itself and they’re trying to get out of that situation right now. They’re trying to improve. The whole top level next to the president (Steven Bearskin) has changed. These are new people and I think they’re more open to ideas, rather than the old guard we used to have there.
And at Servinor?
Servinor has a different president altogether and a different director-general. We have a very reliable financial controller.
At both companies there’s been a small upheaval at the top?
Yes. Yes, both companies.
Thank you.
No problem.
