PrefBlog

6 Responses to “July 14, 2008”

1. lystgl says:

   July 14, 2008 at 10:14 pm

   J Hymas says, “Stockbrokers, I’m sorry to say, are busily attempting to convince clients that preferred dividends from banks in Canada are at risk.”

   Can you elaborate? Why are stockbrokers saying such?

2. jiHymas says:

   July 14, 2008 at 10:26 pm

   To ensure their clients are properly scared.

   A scared client is a client who trades. A scared client is one who remembers how well his hard-nosed, tough-as-nails totally-plugged-in stockbroker carefully looked after his interests.

   And, to give them their due, because they believe it, or at least believe there is a reasonable chance of this coming to pass. Stockbrokers are (to paint with a very broad brush, and most unfairly to those who don’t fit the general description) creatures of momentum. They read the WSJ and the Globe and the FP every morning and every headline screams at them … sell this! buy that! the world is changing and activity is imperative!

   As for me … times are tough. Common dividends won’t be going up for a while. Some might even get cut, but this would involve breaking records on non-decreasing dividends going back to Muddy York, and they will certainly prefer to sell common at a fat discount than to take that step.

   But the preferred dividends on the Big Six Banks? Things would have to get much, much worse before I even considered the possibility without laughing.

   Stockbrokers are not paid for performance – they’re paid for telling an engaging story. Let’s at least see the banks actually losing money – lots of money, over a full year – before we even start even moving their preferred to below investment grade, never mind deep junk territory.

3. cowboylutrell says:

   July 14, 2008 at 11:11 pm

   I remember at the end of the 1980s/very beginning of the 1990s, when the Canadian banks (except TD and CIBC, if I remember correctly) were stuck with bad loans made to South American goverments. It was a lot scarier than the present situation.

4. kaspu says:

   July 15, 2008 at 2:08 pm

   In the category of “chasing at any hopeful straws” a quote from Richard Lehmann who runs a US preferred share fund and newsletter:

   “A News Alert has been issued by Income Securities Advisors.
   The current market is in a state of panic and is causing many to react by selling everything. This is an emotional reaction, a reaction which is usually wrong. We see many perfectly good income securities being driven down for no apparent reason other than that too many people are trying to sell a thinly traded security at the same time. This is reason to buy, not to sell. There are no logical bases for the current pessimism in the market other than rumor being spread by people who are selling short. My best advice for now is to sit tight and wait this downturn out. Fear only last so long without daily reinforcement and I think all the substantive bad news is already out there. As income investors you bought what you hold for its steady income. That continues despite the falling prices. If a true recession comes later this year or early next year, that will help prices to recover since income securities are always a refuge in a bad economy since money moves from stocks to income securities driving down interest rates in the process.”

5. prefwatcher says:

   July 15, 2008 at 4:41 pm

   The situation of US preferreds is pretty desperate. Take a look at PFF the Ishares S&P US Preferred ETF. It was down 5% today (15/7/2008) and has lost 30% of its value since May and currently yields 9.8% The chart is totally parabolic to the downside. 75% of the etf’s holdings are financial preferreds. It may be that some of this panic is affecting CDN financial preferreds.

6. PrefBlog » Blog Archive » July 22, 2008 says:

   July 22, 2008 at 8:12 pm

   […] recovered to where it was July 11 … we’re still trying to recover from the awful, awful July 14, as Louis XVI used to say. The PerpetualDiscount weighted-mean-average pre-tax yield-to-worst is […]