Remember how I said on August 26 that:
But eventually (probably after the Fed Rate has struggled carefully and cautiously to 1% and above) there will be a series of hikes, bang, bang, bang, bang, that will result in a very nasty environment for bonds.
Well, here’s a different view:
Some at the U.S. central bank may still be too optimistic about how high interest rates can rise in the longer run, based on new Federal Reserve Bank of San Francisco research.
San Francisco Fed economist Kevin Lansing started with a simple premise: estimates of the inflation-adjusted neutral interest rate — the one that neither stokes nor slows growth — track pretty well with the U.S. Congressional Budget Office’s four-quarter growth rate of potential GDP estimates. Looking at the CBO’s projections for the next decade, he predicts “a very gradual rise” in the neutral rate, referred to as r-star in standard economic models, from near-zero in 2016 to about 1 percent in 2026.
“If the long-run value of r-star is indeed only around 1 percent or less, then the process of normalizing the federal funds rate may end up being more gradual than the midpoint paths implied,” Lansing wrote. He notes that excluding high and low outliers, officials at the middle of the Fed’s June projection see a longer-run real rate of 1.15 percent.
But don’t be too quick to write of growth! There’s a new growth industry in Germany:
German savers are leaving the security of savings banks for what many now consider an even safer place to park their cash: home safes.
For years, Germans kept socking money away in savings accounts despite plunging interest rates. Savers deemed the accounts secure, and they still offered easy cash access. But recently, many have lost faith.
“It doesn’t pay to keep money in the bank, and on top of that you’re being taxed on it,” said Uwe Wiese, an 82-year-old pensioner who recently bought a home safe to stash roughly €53,000 ($59,344), including part of his company pension that he took as a payout.
Interest rates’ plunge into negative territory is now accelerating demand for impregnable metal boxes.
Burg-Waechter KG, Germany’s biggest safe manufacturer, posted a 25% jump in sales of home safes in the first half of this year compared with the year earlier, said sales chief Dietmar Schake, citing “significantly higher demand for safes by private individuals, mainly in Germany.”
And don’t forget drones!
Before some cutting-edge online retailer can use a drone to drop granola bars on your doorstep, a railroad born when Abe Lincoln was in Congress will first have to iron out the kinks.
BNSF Railway Co. is flying drones as far as 150 miles (240 kilometers) along the New Mexico desert to inspect tracks, helping the Federal Aviation Administration develop rules for operating unmanned aircraft beyond the pilot’s line of sight. That’s an essential step for expanding use to such commercial endeavors as deliveries by Amazon.com Inc. and other companies.
…
BNSF, owned by Buffett’s Berkshire Hathaway Inc., is particularly suited for the task. The railroad operates 32,500 miles of track crisscrossing sparsely populated areas along a well-defined right of way, which eases planning. Communications towers that are part of a safety system for trains can be used to help guide drones.The railroad also has a compelling business case. The Latitude HQ-40 drone that Graetz supervises has a six-foot wingspan and is equipped with cameras that when paired with special software can potentially detect track anomalies more quickly, possibly preventing derailments. The flights, from just outside of Playas, New Mexico, lay the groundwork for drone inspections of other fixed infrastructure, such as pipelines and power lines.
The British aren’t satisfied with the calibre of their secret policemen:
Once again, the British government has decided that US technology companies should shoulder more responsibility for preventing terrorism.
Facebook, Twitter and YouTube are ‘the lifeblood of Daesh’ and are ‘consciously failing’ to prevent the spread of terrorist material, a panel of lawmakers said today, adding that they are ‘hiding behind their supranational legal status’.
In its report, parliament’s home affairs committee accuses the companies of passing the buck when it comes to cracking down on propaganda online.
“They must accept that the hundreds of millions in revenues generated from billions of people using their products needs to be accompanied by a greater sense of responsibility and ownership for the impact that extremist material on their sites is having,” it reads.
The MPs are calling for the web firms to move far more quickly to close down infringing accounts – or give a good reason why not. It also wants them to second staff to work within the Metropolitan Police’s counter-terrorism internet referral unit (CITRU).
But the American Secret Police are very active:
Lorne Wald thought he had run into a technical glitch on a Friday night in early August when PayPal halted his attempts to purchase two books. The 60-year-old retired IT worker in Mount Royal, Que., has had a PayPal Inc. account since the online payment platform came to Canada in late 1990s and has never had any trouble buying things online.
But Mr. Wald’s transaction hit a roadblock when an error message warned that he had violated PayPal’s “terms of use” when he tried to buy The New Persian Kitchen, a cookbook by Louisa Shafia, and The House of God, a satirical novel about Beth Israel hospital in Boston – from Canadian online bookseller BookOutlet.ca.
When he contacted the company’s customer service, he was informed by a representative that “the payment was pending clearance by OFAC [the U.S. Office of Foreign Asset Control].” He asked if he could simply cancel the purchase, and was told no, it would have to be adjudicated by PayPal’s compliance team. “It sort of creeped me out,” Mr. Wald says. “If they are going to try to crack down on crime that’s all very noble, but then it’s in your face; and this is a $20 transaction.”
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5153 % | 1,684.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5153 % | 3,076.8 |
| Floater | 4.88 % | 4.67 % | 76,379 | 16.03 | 4 | -0.5153 % | 1,773.2 |
| OpRet | 4.84 % | -9.41 % | 64,582 | 0.08 | 1 | 0.0000 % | 2,881.5 |
| SplitShare | 5.07 % | 4.26 % | 104,653 | 2.24 | 5 | -0.3017 % | 3,431.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3017 % | 2,677.0 |
| Perpetual-Premium | 5.47 % | 0.12 % | 76,440 | 0.17 | 12 | -0.2519 % | 2,690.5 |
| Perpetual-Discount | 5.11 % | 4.97 % | 106,954 | 14.99 | 26 | -0.2204 % | 2,908.7 |
| FixedReset | 4.92 % | 4.27 % | 143,534 | 7.19 | 89 | -0.5318 % | 2,063.0 |
| Deemed-Retractible | 4.98 % | 1.95 % | 114,224 | 0.24 | 32 | 0.0191 % | 2,810.3 |
| FloatingReset | 2.85 % | 4.06 % | 30,517 | 5.06 | 12 | 0.1203 % | 2,210.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.I | FixedReset | -1.91 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.49 Bid-YTW : 6.46 % |
| MFC.PR.J | FixedReset | -1.83 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.36 Bid-YTW : 7.03 % |
| TD.PF.F | Perpetual-Discount | -1.75 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 4.84 % |
| FTS.PR.H | FixedReset | -1.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 13.58 Evaluated at bid price : 13.58 Bid-YTW : 4.09 % |
| IFC.PR.A | FixedReset | -1.63 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.10 Bid-YTW : 10.05 % |
| MFC.PR.K | FixedReset | -1.51 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.59 Bid-YTW : 8.08 % |
| MFC.PR.L | FixedReset | -1.49 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.51 Bid-YTW : 7.45 % |
| MFC.PR.N | FixedReset | -1.47 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.76 Bid-YTW : 7.41 % |
| MFC.PR.G | FixedReset | -1.34 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.93 Bid-YTW : 6.80 % |
| CU.PR.I | FixedReset | -1.34 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 3.64 % |
| TD.PF.D | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 20.72 Evaluated at bid price : 20.72 Bid-YTW : 4.27 % |
| PVS.PR.D | SplitShare | -1.33 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.43 Bid-YTW : 5.02 % |
| MFC.PR.F | FixedReset | -1.26 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.05 Bid-YTW : 9.96 % |
| BAM.PR.K | Floater | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 10.26 Evaluated at bid price : 10.26 Bid-YTW : 4.67 % |
| FTS.PR.M | FixedReset | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 4.11 % |
| FTS.PR.K | FixedReset | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 18.09 Evaluated at bid price : 18.09 Bid-YTW : 4.03 % |
| SLF.PR.I | FixedReset | -1.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.01 Bid-YTW : 7.30 % |
| RY.PR.O | Perpetual-Discount | -1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 24.65 Evaluated at bid price : 25.06 Bid-YTW : 4.90 % |
| PWF.PR.T | FixedReset | -1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 20.76 Evaluated at bid price : 20.76 Bid-YTW : 3.89 % |
| MFC.PR.M | FixedReset | -1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.91 Bid-YTW : 7.35 % |
| TRP.PR.C | FixedReset | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 13.09 Evaluated at bid price : 13.09 Bid-YTW : 4.32 % |
| PWF.PR.P | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 13.93 Evaluated at bid price : 13.93 Bid-YTW : 4.16 % |
| BNS.PR.D | FloatingReset | 1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.58 Bid-YTW : 6.31 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BIP.PR.C | FixedReset | 782,390 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 23.20 Evaluated at bid price : 25.15 Bid-YTW : 5.27 % |
| TD.PF.G | FixedReset | 269,005 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.59 Bid-YTW : 4.11 % |
| MFC.PR.O | FixedReset | 157,150 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.65 Bid-YTW : 4.03 % |
| TD.PF.A | FixedReset | 128,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 19.19 Evaluated at bid price : 19.19 Bid-YTW : 4.06 % |
| TRP.PR.J | FixedReset | 104,755 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-31 Maturity Price : 25.00 Evaluated at bid price : 26.26 Bid-YTW : 4.34 % |
| FTS.PR.M | FixedReset | 70,763 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-08-29 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 4.11 % |
| There were 22 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TD.PF.F | Perpetual-Discount | Quote: 25.25 – 25.80 Spot Rate : 0.5500 Average : 0.3363 YTW SCENARIO |
| VNR.PR.A | FixedReset | Quote: 18.70 – 19.26 Spot Rate : 0.5600 Average : 0.3561 YTW SCENARIO |
| BNS.PR.P | FixedReset | Quote: 24.39 – 24.69 Spot Rate : 0.3000 Average : 0.1827 YTW SCENARIO |
| PVS.PR.D | SplitShare | Quote: 24.43 – 24.70 Spot Rate : 0.2700 Average : 0.1836 YTW SCENARIO |
| SLF.PR.I | FixedReset | Quote: 19.01 – 19.40 Spot Rate : 0.3900 Average : 0.3074 YTW SCENARIO |
| SLF.PR.H | FixedReset | Quote: 16.30 – 16.58 Spot Rate : 0.2800 Average : 0.1999 YTW SCENARIO |