The August, 2014, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.
The regular appendices reporting on DeemedRetractibles and FixedResets are included.
PrefLetter may now be purchased by all Canadian residents.
Until further notice, the “Previous Edition” will refer to the August, 2014, issue, while the “Next Edition” will be the September, 2014, issue, scheduled to be prepared as of the close September 12 and eMailed to subscribers prior to market-opening on September 15.
PrefLetter is intended for long term investors seeking issues to buy-and-hold. At least one recommendation from each of the major preferred share sectors is included and discussed.
Note: My verbosity has grown by such leaps and bounds that it is no longer possible to deliver PrefLetter as an eMail attachment – it’s just too big for my software! Instead, I have sent passwords – click on the link in your eMail and your copy will download.
Note: The PrefLetter website has a Subscriber Download Feature. If you have not received your copy, try it!
Note: PrefLetter eMails sometimes runs afoul of spam filters. If you have not received your copy within fifteen minutes of a release notice such as this one, please double check your (company’s) spam filtering policy and your spam repository – there are some hints in the post Sympatico Spam Filters out of Control. If it’s not there, contact me and I’ll get you your copy … somehow!
Note: There have been scattered complaints regarding inability to open PrefLetter in Acrobat Reader, despite my practice of including myself on the subscription list and immediately checking the copy received. I have had the occasional difficulty reading US Government documents, which I was able to resolve by downloading and installing the latest version of Adobe Reader. Also, note that so far, all complaints have been from users of Yahoo Mail. Try saving it to disk first, before attempting to open it.
Note: There have been other scattered complaints that double-clicking on the links in the “PrefLetter Download” email results in a message that the password has already been used. I have been able to reproduce this problem in my own eMail software … the problem is double-clicking. What happens is the first click opens the link and the second click finds that the password has already been used and refuses to work properly. So the moral of the story is: Don’t be a dick! Single Click!
Note: Assiduous Reader DG informs me:
In case you have any other Apple users: you need to install a free App from the apple store called “FileApp”. It comes with it’s own tutorial and allows you to download and save a PDF file.
Hi James,
Thanks again for another excellent PrefLetter.
At various times in this and other PrefLetters, your mention that a particular issue is favoured over another on “dynamic grounds”. What do you mean by this?
I’ll have to add that to the explanation of technical terms!
Valuation is not just about Fair Value and Yield and all that good stuff. Sometimes an issue can stray from its otherwise calculated fair value for very long periods of time, and the overall valuation accounts for this.
For example, take POW.PR.F and its sinking fund. HIMIPref™ doesn’t know there is a sinking fund; there’s no place in the input data to indicate this. If there was a place to indicate this, it would be impossible to come up with a statistically significant analysis of what effect this has on fair value because so few issues have sinking funds.
Logically, we would expect the presence of a sinking fund to boost the price of the preferreds, particularly when we are already trading at a discount to par instead of merely being afraid it might trade at a discount in the future. So, say we calculate Fair Value, using all the HIMIPref™ data, to be $40. But it persistently trades at $42.
Then, one day the price moves to $41. Is it cheap or rich? We have a “Valuation Effect” making us expect it to move towards $40, but we have a “Dynamic Effect” making us expect it to move towards $42. We don’t really know – in the context of HIMIPref™ – what might be causing that dynamic effect; but we do know, from our simulations, that accounting for this dynamic effect improves long term returns.
Other sources of long-term deviation from fair value could include strange liquidity effects (for instance, some Split Shares are becoming quite liquid, but there are relatively few blocks around. I wouldn’t want to get an order to buy $2-million worth within a day!) and issuer unpopularity (for instance, BAM in general is cheap; during the Credit Crunch, CM in general was cheap. But the system doesn’t and didn’t automatically load up on these things because they’re ALWAYS cheap).