March 8, 2013

The US reported a good jobs number:

ob growth surged last month as automakers, builders and retailers pushed the unemployment rate to a four-year low, defying concerns that budget battles in Washington would harm the economic expansion.

Employment rose 236,000 last month after a revised 119,000 gain in January that was smaller than first estimated, Labor Department figures showed today in Washington. The median forecast of 90 economists surveyed by Bloomberg projected an advance of 165,000. The jobless rate dropped to 7.7 percent, the lowest since December 2008, from 7.9 percent.

This was echoed in Canada:

Canada’s see-sawing labour force swung back into job-creation mode in February, with a net 50,700 people finding work. Most of those new hires were aged 55 or older — continuing a trend from January.

There’s a kerfuffle about revolving door regulation in the US:

“There’s a basic resistance to seeing things from the investor point of view,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “It all goes back to the same thing — the degree to which the industry dominates this whole conversation.”

It’s a cultural problem as Roper sees it: Regulators and the regulated operate in a setting where people with the same pedigree move back and forth between government and private- sector jobs and outside views carry little weight. SEC spokesman Kevin Callahan said in an e-mail that investor protection is at the core of all the agency’s actions, and that until an investor advocate is appointed, existing SEC offices are performing the roles required by Dodd-Frank.

A study released last month by the Project on Government Oversight, a nonprofit watchdog group, stirred up a discussion about the revolving door of lawyers who alternate between government and industry, where they defend banks and brokers. Sorting through documents filed by 419 SEC alumni who had recently left the agency, the Project found 2,000 cases in which alumni planned to represent a client or an employer before the SEC between 2001 and 2010.

That’s a lot of meetings among lawyers who used to work down the hall from one another, but who now — officially, anyway — are adversaries. In the view of SEC critics, it is part of the clubby state of affairs that pushes government watchdogs and banks to see things the same way. Callahan said that the U.S. Government Accountability Office studied the revolving-door issue and concluded that the SEC’s controls were as strong as those of other government agencies. What a relief.

The problem is not so much that these guys know each other; I suspect that this helps as much as it hurts in terms of lawyers having a known reputation and encourages a little more frankness than might otherwise be the case. The problem is that the regulatory guys are representing their current employer against their future employer.

Instead of addressing the issues, the SEC is busily enforcing Brazilian laws:

A published report says the Brazilian operations of Brookfield Asset Management Inc. are under investigation by the U.S. Securities and Exchange Commission over allegations that it used bribes to get approval for construction deals.

The Wall Street Journal report said the SEC is expected to interview former Brookfield executive Daniela Gonzalez, who worked in its Sao Paulo unit, over allegations she made.

The Great White Fathers at the SEC evidently believe that Brazilian savages can’t enforce their own laws.

Fitch downgraded Italy:

Fitch Ratings-London-08 March 2013: Fitch Ratings has downgraded Italy’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘BBB+’ from ‘A-‘. The Outlook on the Long-term IDRs is Negative. Fitch has simultaneously affirmed the Short-term foreign currency IDR at ‘F2’ and the common eurozone Country Ceiling for Italy at ‘AAA’.
The downgrade of Italy’s sovereign ratings reflects the following key rating factors:

– The inconclusive results of the Italian parliamentary elections on 24-25 February make it unlikely that a stable new government can be formed in the next few weeks. The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession.
– Q412 data confirms that the ongoing recession in Italy is one of the deepest in Europe. The unfavourable starting position and some recent developments, like the unexpected fall in employment and persistently weak sentiment indicators, increase the risk of a more protracted and deeper recession than previously expected. Fitch expects a GDP contraction of 1.8% in 2013, due largely to the carry-over from the 2.4% contraction in 2012.
– Due to the deeper recession and its adverse impact on headline budget deficit, the gross general government debt (GGGD) will peak in 2013 at close to 130% of GDP compared with Fitch’s estimate of 125% in mid-2012, even assuming an unchanged underlying fiscal stance.
– A weak government could be slower and less able to respond to domestic or external economic shocks.

Spend-Every-Penny continued his centrally planned micromanaging approach to banking:

Canada’s Finance Minister has taken his battle against a housing bubble an extraordinary step further, issuing rare praise for the country’s banks for not matching Bank of Montreal’s cut-rate mortgage.

Jim Flaherty said Friday he also spoke with BMO this week after it cut its five-year, fixed-rate mortgage last weekend to 2.99 per cent, expressing how troubled he was by the cut from 3.09 per cent.

“I spoke with them about that this week and expressed my concern … in two ways,” Mr. Flaherty told reporters in Ottawa.

There is not any mention in the article of the FedGov’s policy of pouring gasoline onto the housing market fire by increasing the amount of federal mortgage insurance available through the CMHC.

Norway’s Sovereign Wealth Fund returned 13.4% last year. The fund has recently formalized its rebalancing policy and has returned +2.57% p.a. real return since 1998; note, however that this does not appear to be as good as the OTPP returns. If a pension plan wants good returns, it needs a captive asset manager.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums off 3bp, FixedResets down 12bp and DeemedRetractibles gaining 2bp. Volatility was nil. Volume was on the high side of average.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.3289 % 2,626.0
FixedFloater 4.09 % 3.43 % 30,117 18.42 1 0.0000 % 3,971.7
Floater 2.53 % 2.86 % 89,704 20.01 5 0.3289 % 2,835.3
OpRet 4.80 % 2.49 % 50,592 0.31 5 -0.0464 % 2,595.3
SplitShare 4.29 % 4.50 % 118,979 4.23 4 0.3441 % 2,930.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0464 % 2,373.2
Perpetual-Premium 5.21 % 1.57 % 86,531 0.15 31 -0.0268 % 2,356.7
Perpetual-Discount 4.82 % 4.85 % 139,254 15.65 4 -0.1111 % 2,657.6
FixedReset 4.89 % 2.72 % 292,536 3.33 80 -0.1175 % 2,508.5
Deemed-Retractible 4.86 % 1.73 % 140,574 0.22 44 0.0247 % 2,446.8
Performance Highlights
Issue Index Change Notes
No issues gained or lost more than 1% today
Volume Highlights
Issue Index Shares
BAM.PR.T FixedReset 96,900 Nesbitt crossed 50,000 at 26.40; Desjardins crossed 38,000 at the same price.
Maturity Type : Call
Maturity Date : 2017-03-31
Maturity Price : 25.00
Evaluated at bid price : 26.39
Bid-YTW : 3.26 %
TRP.PR.D FixedReset 88,320 Recent new issue.
Maturity Type : Limit Maturity
Maturity Date : 2043-03-08
Maturity Price : 23.25
Evaluated at bid price : 25.46
Bid-YTW : 3.57 %
GCS.PR.A SplitShare 61,500 Recent new issue.
Maturity Type : Hard Maturity
Maturity Date : 2019-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 4.10 %
RY.PR.T FixedReset 53,359 TD crossed 50,000 at 26.60.
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.58
Bid-YTW : 2.03 %
RY.PR.H Deemed-Retractible 52,630 TD crossed 49,600 at 26.45.
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 26.40
Bid-YTW : -1.00 %
ABK.PR.C SplitShare 39,900 New issue settled today.
Maturity Type : Call
Maturity Date : 2014-03-10
Maturity Price : 31.64
Evaluated at bid price : 31.89
Bid-YTW : 3.18 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.G FixedReset Quote: 26.31 – 26.63
Spot Rate : 0.3200
Average : 0.1842

Maturity Type : Call
Maturity Date : 2016-12-19
Maturity Price : 25.00
Evaluated at bid price : 26.31
Bid-YTW : 2.90 %

HSB.PR.D Deemed-Retractible Quote: 25.91 – 26.31
Spot Rate : 0.4000
Average : 0.2862

Maturity Type : Call
Maturity Date : 2013-04-07
Maturity Price : 25.50
Evaluated at bid price : 25.91
Bid-YTW : -3.60 %

BAM.PF.A FixedReset Quote: 26.26 – 26.52
Spot Rate : 0.2600
Average : 0.1572

Maturity Type : Call
Maturity Date : 2018-09-30
Maturity Price : 25.00
Evaluated at bid price : 26.26
Bid-YTW : 3.68 %

GWO.PR.I Deemed-Retractible Quote: 24.50 – 24.85
Spot Rate : 0.3500
Average : 0.2507

Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 4.76 %

PWF.PR.L Perpetual-Premium Quote: 25.56 – 25.83
Spot Rate : 0.2700
Average : 0.1979

Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.56
Bid-YTW : 4.62 %

RY.PR.I FixedReset Quote: 25.51 – 25.73
Spot Rate : 0.2200
Average : 0.1551

Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 3.05 %

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