Well, that was a week-and-a-half, that was!
As proof, I offer up the TSX Press Release which states:
There were 707,441 trades today on Toronto Stock Exchange, a new historical high. The previous high was 704,261 trades on August 9, 2007.
I feel a bit sorry for August 9 – setting a new high and only getting one day in the sun! It’s a bit like breaking the world record for something at the Olympic Games, only to find you have to settle for silver.
The number of trades will be a function of the rise of Algorithmic Trading, which should not be confused with Quantitative Investing, which should most definitely not be confused with Technical Analysis.
Algorithmic trading is the practice of feeding a few simple rules into a simple computer programme and having the programme place orders into the market place as required. For instance, you can tell your programme that you want to sell X to buy Y at a take-out of $1.00, up to a limit of 50,000 shares, to stay on the offer and bid, respectively, to the extent that if you get filled on one side you can take market action on the other, as long as you stay within 1,000 shares of equal execution. Or something like that. Such a programme could lead to a huge number of orders, as it executed in pieces over the day. But who cares? It cost you two minutes to input these specifications, five minutes to check up on it through the day and five cents worth of electricity. The Financial Times did a series on it.
Quantitative Investing, on the other hand, is the practice of measuring investment characteristics and making investment decisions on the basis of these numbers. Anybody who has ever compared P/E ratios has invested quantitatively, at least to some extent. Practitioners of Quantitative Investing, known as Quants, make most, if not all, of their investment decision based on such numbers. The programmes used for Quant investing range from moronic six line spreadsheets to things like (cough, cough) HIMIPref™.
Technical Analysis is the practice of making an idiot of yourself through the creative use of graph paper, different colours of ink, sacrificed chickens and dirt taken from a graveyard at midnight. It is not suitable for discussion in polite society, such as, f’rinstance, in this blog. A slightly more favourable description of the process is at Investopedia.
Yeah, so anyway, the TSX had a huge day in terms of trade volume and I hope the tech guys are enjoying a relaxing beer at this point.
The day was wild, both in the US and Canada, as sub-prime worries struggled with confidence-boosting cash from the Central Banks for investors’ hearts and minds.
No hedge funds actually went bust today, as far as I know, but there are reports that Goldman’s Alpha Fund is now down 26% for 2007 to date. Deutsche Bank has disclosed that a fund with no sub-prime exposure has experienced 30% redemptions in August alone.
This scale of redemptions sucks up liquidity like crazy, which is one reason the central banks are stepping up. The CEO of Countrywide Credit thinks it will have a salutary effect on confidence (he’d better hope so!) and even the Bush administration has made a cheerleading effort, although not everybody buys what they’re selling. There’s much more confidence being expressed in the technocrats – e.g. Bernanke. Most comment is favourable.
The Treasury market stopped the panic buying as did Canadas, with the long-end continuing its weakness on fears all this money’s going to cause inflation.
The preferred market had a poor day, with all but one of the HIMIPref™ Preferred indices down on the day. But … that means yields are going up! In keeping with the “flight to quality” theme, there were quite a few lower rated (and non-index-included) issues down substantially on the day: BBD.PR.D, -4.15%; GT.PR.A, -2.93%; SPL.A, -2.87%; DC.PR.A, -2.64%; NTL.PR.F, -2.35%; WN.PR.A, -1.48%; DW.PR.A, -1.46%; WN.PR.E, -1.22%; BBD.PR.B, -1.06%; and finally IQW.PR.D, -1.00%. The two Mulvihill funds in that list, GT.PR.A and SPL.A are showing amazing yields … if they don’t default … which is not as likely as one might wish.
The TSX’s record trade count didn’t get much help from preferreds, as volume was pretty low.
| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30 | |||||||
| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | 4.75% | 4.77% | 28,367 | 15.97 | 1 | -0.1228% | 1,043.7 |
| Fixed-Floater | 5.02% | 5.01% | 127,073 | 14.16 | 8 | -0.6525% | 1,014.3 |
| Floater | 4.89% | 0.26% | 73,120 | 8.14 | 4 | -0.2409% | 1,046.1 |
| Op. Retract | 4.83% | 4.10% | 82,480 | 3.15 | 16 | -0.1018% | 1,023.4 |
| Split-Share | 5.06% | 4.78% | 100,290 | 4.13 | 15 | -0.3757% | 1,042.0 |
| Interest Bearing | 6.22% | 6.64% | 64,157 | 4.63 | 3 | +0.4145% | 1,036.4 |
| Perpetual-Premium | 5.53% | 5.21% | 101,808 | 5.64 | 24 | -0.1354% | 1,022.8 |
| Perpetual-Discount | 5.07% | 5.11% | 304,937 | 15.31 | 39 | -0.0631% | 976.9 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| CFS.PR.A | SplitShare | -3.8647% | On ZERO volume. Asset coverage as of August 3 is about 2.1:1, according to CC&L. Now with a pre-tax bid-YTW of 4.47% based on a bid of 9.95 and a hardMaturity 2012-1-31 at 10.00. |
| BAM.PR.J | OpRet | -1.8311% | Now with a pre-tax bid-YTW of 4.89% based on a bid of 26.27 and a softMaturity 2018-3-30 at 25.00. |
| BCE.PR.I | FixFloat | -1.7178% | |
| RY.PR.E | PerpetualDiscount | -1.2898% | Now with a pre-tax bid-YTW of 4.91% based on a bid of 22.96 and limitMaturity. |
| FTU.PR.A | SplitShare | -1.0628% | Asset coverage is just under 2.1:1 as of July 31, according to Quadravest, although with a name like “US Financial 15 Split Corporation”, it’s entirely possible that the underlying portfolio has been volatile lately! Now with a pre-tax bid-YTW of 4.78% based on a bid of 10.24 and a hardMaturity 2012-12-01 at 10.00 |
| BSD.PR.A | InterestBearing | +1.2931% | Continuing its recent gyrations. Asset coverage is 1.86:1 as of August 3, according to Brookfield Funds. Now with a pre-tax bid-YTW of 7.25% (as interest!) based on a bid of 9.40 and a hardMaturity 2015-3-31 at 10.00. |
| MFC.PR.A | OpRet | +1.5217% | Now with a pre-tax bid-YTW of 3.63% based on a bid of 26.02 and a softMaturity 2015-12-18 at 26.02. That’s an interest-equivalent of 5.08% … MFC bonds maturing in 2016 are currently yielding about 5.40%. |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| SLF.PR.B | PerpetualDiscount | 31,300 | TD crossed 18,500 at 24.43. Now with a pre-tax bid-YTW of 5.00% based on a bid of 24.25 and a limitMaturity. |
| MFC.PR.A | OpRet | 23,100 | TD crossed 13,000 at 26.30, and I wish I had the name and number of the client on the buy side! See “Major Price Moves”, above. |
| SLF.PR.D | PerpetualDiscount | 20,165 | Nesbitt bought 16,600 from Hampton in two tranches, both at 22.45, 23 minutes apart. Now with a pre-tax bid-YTW of 5.02% based on a bid of 22.45 and a limitMaturity. |
| SLF.PR.E | PerpetualDiscount | 18,565 | Now with a pre-tax bid-YTW of 5.02% based on a bid of 22.69 and a limitMaturity. |
| BNS.PR.L | PerpetualDiscount | 15,110 | Now with a pre-tax bid-YTW of 4.92% based on a bid of 23.03 and a limitMaturity. |
There were five other $25-equivalent index-included issues trading over 10,000 shares today.
[…] Well, that’s the end of another week-and-a-half! I said the same thing August 10 … I’m gonna start putting in for overtime. […]