It was an exciting day for equities:
U.S. stocks plunged the most in 6 1/2 years, with the Dow Jones Industrial Average sinking more than 1,100 points, as the equity selloff reached a fever pitch amid rising concern that inflation will force interest rates higher. Treasuries rallied and gold rose on haven demand.
…
Selling accelerated shortly after 3 p.m. in New York, with the Dow sinking more than 800 points in a matter of 15 minutes only to snap back. The blue-chip index ended lower by 4.6 percent — its steepest drop since August 2011, and is also lower for the year. The Cboe Volatility Index more than doubled to its highest level in 2 1/2 years.
The plunge just after 3pm has some talking about a flash crash:
“We can officially call the last 20ish minutes a flash crash,” said Dennis Debusschere, head of portfolio strategy at Evercore ISI. Loosely defined, the term “flash crash” denotes a phenomenon in electronic markets in which the withdrawal of stock orders rapidly exacerbates price declines.
I don’t know how a flash crash becomes official. I suppose there’s some foundation somewhere, stuffed with money and wiser heads than mine, who solemnly deliberate for years (well, seconds, anyway) before awarding the designation.
In another example of the incompetent complacency that afflicts the industry, some US retail sites went down:
The web sites of two of the country’s biggest robo-advisers — Wealthfront Inc. and Betterment LLC — crashed as the S&P 500 Index sank 4.1 percent.
…
Outages were also reported at incumbent online brokerages Vanguard Group and Charles Schwab Corp.
…
At Vanguard, “some clients may have experienced sporadic difficulty accessing their accounts” online and by phone, spokeswoman Emily Farrell said in an email. Increased demand delayed logons for some clients at Schwab “for a few minutes,” said spokeswoman Mayura Hooper.
Still, I won’t excoriate them too severely for troubles on one day. The test will be whether or not they address the problem quickly.
To my astonishment, some of the sleepyheads in Ottawa have noticed that effective marginal tax rates are important:
Conservative finance critic Pierre Poilievre introduced the Opportunities for Workers with Disabilities Act Monday, a private members’ bill that has the support of several advocacy groups representing social workers and people with disabilities.
…
Research by the Library of Parliament has shown that in some provinces, low-income Canadians on social assistance actually give up more income than they earn by returning to work. This is primarily because many provincial social-assistance programs are geared to income, meaning they are clawed back as work income rises.Mr. Poilievre’s bill proposes that Finance Canada should calculate how much people with disabilities would lose in taxes and benefit clawbacks for each additional $1,000 of working income up to $30,000.
If Ottawa finds situations where clawbacks exceed the amount of new employment income, the bill calls on the finance minister to “identify and consider” changes that could be made to federal taxation and benefits in order to reduce that amount.
It also calls for a new clause in the Canada Social Transfer to ensure that the amount lost in benefits by disabled Canadians does not exceed the amount gained in employment income up to $30,000.
I’m not sure what research is being referred to in the story. Probably not Scaling the Welfare Wall from 2006, as that found an effective rate at the bottom of the pile of a mere 78%, which clearly gives huge incentive for picking up that extra shift; however, it was used to justify additional complexity in the tax system as noted in the 2006 Budget Plan.
I’m not sure just what makes those with formally recognized disabilities more deserving of a moment’s thought than anybody else and I’m equally unsure of what makes an effective marginal tax rate of 99.9% a perfectly good and completely appropriate thing to have, but I suppose that this bill represents a start, of sorts.
| 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 | 0.0000 % | 2,903.2 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 5,327.2 |
| Floater | 3.42 % | 3.60 % | 52,899 | 18.28 | 4 | 0.0000 % | 3,070.1 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2258 % | 3,155.3 |
| SplitShare | 4.65 % | 4.15 % | 67,669 | 3.35 | 5 | 0.2258 % | 3,768.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2258 % | 2,940.0 |
| Perpetual-Premium | 5.40 % | 4.89 % | 64,351 | 2.09 | 20 | -0.3725 % | 2,854.4 |
| Perpetual-Discount | 5.31 % | 5.33 % | 67,359 | 14.93 | 14 | -0.2760 % | 2,984.3 |
| FixedReset | 4.21 % | 4.55 % | 147,869 | 3.85 | 101 | -0.2838 % | 2,535.1 |
| Deemed-Retractible | 5.10 % | 5.66 % | 85,756 | 5.78 | 28 | -0.4629 % | 2,931.1 |
| FloatingReset | 3.02 % | 2.95 % | 43,941 | 3.75 | 10 | 0.0000 % | 2,779.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.B | FixedReset | -2.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-05 Maturity Price : 17.15 Evaluated at bid price : 17.15 Bid-YTW : 4.77 % |
| GWO.PR.T | Deemed-Retractible | -1.41 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 5.70 % |
| HSE.PR.G | FixedReset | -1.39 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-06-30 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 5.10 % |
| BAM.PF.C | Perpetual-Discount | -1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-05 Maturity Price : 21.66 Evaluated at bid price : 21.98 Bid-YTW : 5.57 % |
| BAM.PR.N | Perpetual-Discount | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-05 Maturity Price : 21.29 Evaluated at bid price : 21.56 Bid-YTW : 5.57 % |
| W.PR.H | Perpetual-Premium | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-05 Maturity Price : 24.80 Evaluated at bid price : 25.02 Bid-YTW : 5.54 % |
| MFC.PR.B | Deemed-Retractible | -1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 6.73 % |
| BMO.PR.Q | FixedReset | -1.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.64 Bid-YTW : 4.58 % |
| BAM.PR.T | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-05 Maturity Price : 21.53 Evaluated at bid price : 21.53 Bid-YTW : 4.95 % |
| RY.PR.J | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-05-24 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 4.46 % |
| MFC.PR.C | Deemed-Retractible | -1.00 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.73 Bid-YTW : 7.05 % |
| MFC.PR.L | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.79 Bid-YTW : 5.15 % |
| GWO.PR.N | FixedReset | 1.28 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.75 Bid-YTW : 6.75 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.S | FixedReset | 248,462 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-05 Maturity Price : 23.11 Evaluated at bid price : 24.85 Bid-YTW : 4.51 % |
| BMO.PR.R | FloatingReset | 172,500 | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-25 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 2.77 % |
| TD.PR.Z | FloatingReset | 100,000 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.78 Bid-YTW : 2.95 % |
| MFC.PR.H | FixedReset | 78,700 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.32 Bid-YTW : 5.09 % |
| TD.PF.H | FixedReset | 74,977 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.10 Bid-YTW : 3.62 % |
| TRP.PR.D | FixedReset | 57,385 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-05 Maturity Price : 23.31 Evaluated at bid price : 23.80 Bid-YTW : 4.70 % |
| There were 29 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| HSE.PR.G | FixedReset | Quote: 24.85 – 25.33 Spot Rate : 0.4800 Average : 0.3493 YTW SCENARIO |
| BMO.PR.Q | FixedReset | Quote: 22.64 – 22.99 Spot Rate : 0.3500 Average : 0.2265 YTW SCENARIO |
| TRP.PR.B | FixedReset | Quote: 17.15 – 17.56 Spot Rate : 0.4100 Average : 0.3133 YTW SCENARIO |
| TRP.PR.G | FixedReset | Quote: 24.32 – 24.60 Spot Rate : 0.2800 Average : 0.1858 YTW SCENARIO |
| NA.PR.A | FixedReset | Quote: 26.40 – 26.63 Spot Rate : 0.2300 Average : 0.1361 YTW SCENARIO |
| CU.PR.I | FixedReset | Quote: 25.65 – 26.00 Spot Rate : 0.3500 Average : 0.2565 YTW SCENARIO |
Canadians on social assistance actually give up more income than they earn by returning to work.
I fully expect the next big conversation (given the demographics and accelerating numbers entering their retirement years) to be the scaling back of CPP and OAS for those who have saved “too much” based on some means test. No soup for you!
scaling back of CPP and OAS for those who have saved “too much”
Possibly – but the OAS is already subject to clawback, which distorts investment decision-making. And various governments have spent so much political capital touting the CPP as a true pension fund, rather than an inter-generational income-transfer tax that it would be hard to return to the old paradigm.
But yes, it’s possible. And I certainly hope that it leads some people to consider the benefits of universality and the disadvantages of means-testing.