Category: Market Action

Nothing happened today.

Another hot day for the Canadian preferred share market, with PerpetualDiscounts winning 53bp, while both FixedResets and DeemedRetractibles were up 25bp. Volume was abysmally low.

It seems I have another competitor, of whom I was not previously aware: NexGen Canadian Preferred Share Tax Managed Fund, managed by Jeff Herold of JZechner Associates Inc.. He had a piece in the Globe today titled Preferred shares offer lush yields for those who do their homework.

They’ve accumulated over $37-million in assets! Sure is nice to have good distribution channels…

Boyd Erman of the Globe writes a polemic titled Hyperinflation thesis has been discredited, yet it still ticks:

Looking back over 2013, it’s hard to imagine a more off-base call than the hyperinflation thesis. In fact, the whole idea that “money printing” would cause prices to skyrocket, turning the world into one big Zimbabwe, has been wrong for a number of years since it cropped up as a result of central banks’ response to the 2008 crisis.

As that realization finally set in this year, most commodity prices fell. Worse for many Canadian investors, gold went off a cliff, falling from nearly $1,700 (U.S.) an ounce to about $1,200. Without the notion of the metal as an inflation hedge, any “need” for gold vanished, aside from bling.
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Wrong-headed forecasts about inflation are hammering lots of small investors who were sucked into the hysteria. They, of course, are not alone. John Paulson, please stand up, along with gold miners who invested in big projects at the peak.

The Canadian preferred share market was on wheels today, with PerpetualDiscounts winning 68bp, FixedResets gaining 3bp and DeemedRetractibles up 24bp. Not surprisingly, the Performance Highlights table was dominated by winning PerpetualDiscounts and DeemedRetractibles. Volume, such as it was, which wasn’t much, was also notable for its high proportion of Straights.

There are some interesting battles surrounding solar energy in the States:

A system of generous net metering rules may have made sense at the outset of the solar revolution to get the party started. Now, however, it’s clear that it will have enormous disruptive impacts on APS and other utilities that bear the burden of keeping the grid operating.

“Somebody has to pay for maintenance and upkeep,” Guldner said, and solar users in the current rate structure aren’t doing so.
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Republican and libertarian support for solar is informed by a “don’t tread on me” response to the utility monopoly system, making foes of those that might have been friends. It’s a wing of the pro-solar coalition that no one — and certainly not the anti-solar crowd — anticipated.
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Inside, it was clear that APS and its supporters were out of luck. The idea for the $4.90 [grid maintenance] fee [for household solar users] came from the solar side — and very likely swung the vote.

The charge won’t be enough to cover the utility’s grid costs until their next rate case in 2015, APS’s Guldner said, and will probably require the company to ask for much bigger fees down the road.

“In 2016, that rate increase could be a big one” and the utility will probably win the argument, Guldner said.

My guess? The grid will be ignored until the next disaster.

It was a mostly negative day for the Canadian preferred share market, with PerpetualDiscounts down 14bp, FixedResets flat and DeemedRetractibles off 9bp. Volatility was muted. Volume was extremely low.

PerpetualDiscounts now yield 5.69%, equivalent to 7.40% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.8%, so the pre-tax interest-equivalent spread is now about 260bp, a slight (and perhaps spurious) narrowing from the 265bp reported December 18.

TD.PR.A and TD.PR.C were called for redemption yesterday, filling in a blank in the schedule of upcoming Exchange Dates. Of the thirteen Exchange Dates between now and February 24, ten will be resolved by redemption. Next up is BMO.PR.N, (Exchange Date 2014-2-25) but with an Issue Reset Spread of +383bp, there’s not much suspense surrounding the eventual announcement. In fact, the seven following Exchange Dates (going out to June 1) are all for issues with spreads in excess of 400bp, so there’s not a lot of scope for entertaining speculation.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 14bp, FixedResets down 3bp and DeemedRetractibles off 2bp. The Performance Highlights table is surprisingly lengthy. Volume was very low, as might be expected on a half day.

Bloomberg has an article detailing the importance of going to the right school.

The Globe & Mail today features some of the more unusual investment advice I’ve seen recently:

While the couple pay a low-cost annual fee for management of their investments, [Raymond James advisor] Ms. [Patti] Dolan says they are not reaping any benefit from this arrangement. “From my review of the statements it appears the accounts are being charged a 1-per-cent management fee – for what?” she asks. “The concept of paying a percentage of assets is to lower commission costs.” Their account shows little activity in recent months, and it’s clear that most of the past activity has only served to hurt their financial position. “If you are paying a fee, no matter if you are making or losing money, there should be activity in the account to justify the money the adviser is receiving.”

Um … no. You pay asset-based fees in order to disengage trading activity from portfolio management. Sometimes the smartest thing to do is nothing. Secondarily, in a AUM-based fee situation, the advisor’s financial interest is somewhat better aligned with that of the client’s.

Utility Split Trust, proud issuer of UST.PR.B, was confirmed at Pfd-2(low) by DBRS.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 4bp, FixedResets up 11bp and DeemedRetractibles off 1bp. The Performance Highlights table was lengthier than might be expected, but with no clear pattern. Volume was above average.

Nothing happened today.

It was a fine day for the Canadian preferred share market, with PerpetualDiscounts winning 37bp, FixedResets gaining 21bp and DeemedRetractibles up 22bp. Volatility was average. Volume was very high.

Nothing happened today.

The Canadian preferred share market bounced back a little today, with PerpetualDiscounts winning 26bp, FixedResets gaining 1bp and DeemedRetractibles up 5bp. PerpetualDiscounts dominated the winning side of the Performance Highlights table. Volume was extremely high.

Today’s big news is … tapering:

Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee sees the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate.
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The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
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Voting against the action was Eric S. Rosengren, who believes that, with the unemployment rate still elevated and the inflation rate well below the target, changes in the purchase program are premature until incoming data more clearly indicate that economic growth is likely to be sustained above its potential rate.

In other words, the economy is still in the garbage but some of the maggots have died. Some were astonished:

U.S. stocks rose, sending benchmark indexes to all-time highs, after the Federal Reserve said it will reduce the pace of its monthly bond purchases and expressed confidence in the labor market recovery.

Homebuilders rallied after the Fed said it may hold interest rates near zero even if unemployment falls below the 6.5 percent rate the central bank previously cited as a likely catalyst for an increase. CVS Caremark Corp. jumped 4.3 percent after boosting its dividend. Jabil Circuit Inc. slumped 21 percent as earnings missed analysts’ estimates.

The Standard & Poor’s 500 Index (SPX) advanced 1.7 percent to 1,810.65 at 4 p.m. in New York, surpassing its previous record close reached on Dec. 9. The Dow Jones Industrial Average surged 292.71 points, or 1.8 percent, to an all-time high of 16,167.97. Both gauges posted their biggest gains in two months. About 8.1 billion shares changed hands on U.S. exchanges, the busiest trading since September.

Here in Canada, we continue to be enthralled by idiotic civil servants:

Mr. Chopra also dismissed other possible options for fixing the post office. Three-day-a-week delivery was unacceptable to businesses, particularly smaller ones, he said.

Three days a week is unacceptable, but zero days a week is super! Next!

Many welcome the idea of walking to a centralized neighbourhood mailbox – already the reality for roughly a quarter of households – he said at an emergency session of the House of Commons transport committee Wednesday, requested by the opposition.

“The seniors are telling me, ‘I want to be healthy. I want to be active in my life,’” Mr. Chopra told MPs. “They want to be living fuller lives.”

It was another negative day for the Canadian preferred share market, with PerpetualDiscounts losing 29bp, FixedResets off 1bp and DeemedRetractibles down 11bp. PerpetualDiscounts comprise the entire bad side of the Performance Highlights table. Volume was enormous.

PerpetualDiscounts now yield 5.72%, equivalent to 7.44% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.8% so the pre-tax, interest-equivalent spread is now about 265bp, a slight (and perhaps spurious) widening from the 260bp reported December 11.

So – are the politicians and bureaucrats fanning fear regarding financial stability so they can increase revenue?

The U.S. Securities and Exchange Commission said on Tuesday it levied a record $3.4-billion (U.S.) in sanctions in enforcement cases in the latest fiscal year, up 10 per cent from the previous year.
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Fiscal 2013’s total sanctions were 22 per cent higher than those obtained in the 2011 fiscal year, the agency said.

DBRS confirmed GWO:

The Minimum Continuing Capital and Surplus Requirement ratio of the Company’s major regulated operating subsidiary, The Great-West Life Assurance Company, is strong at 221%. GWO has traditionally operated with higher financial leverage than most of its Canadian peers, a reflection of its debt-financed mergers and acquisitions activity. The debt and preferred share-to-total capital leverage ratio was 32.7% as at September 30, 2013, which is higher than its Canadian peers, and higher than the 25% level for a AA rating category. Fixed-charge coverage ratios at GWO nevertheless remain healthier, with less volatile earnings than those of its peers. DBRS considers the Company’s financial leverage and fixed-charge ratios acceptable for the current rating category with expectations of reduced leverage over time and views the Company as conservatively managed with a track record of consistent profitability.

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts losing 22bp, FixedResets off 18bp and DeemedRetractibles down 21bp. Low-spread FixedResets were again prominent on the wrong side of the Performance Highlights table. Volume was extremely heavy.

No commentary today! PrefLetter has left me a hollow shell of a man.

But I will say that I’m very glad to see that the thug from Nova Scotia, Lenore Zann, appears to intend to quit Twitter. This two-bit politician got into some kind of dispute on Twitter and immediately had hysterics, calling the police, the Nova Scotia ‘CyberBullying Squad’, and her antagonist’s high-school principal (believe it or not!) in order to make the problem go away. In so doing she showed a lamentable disregard for the law and the Charter of Rights as well as simply behaving extremely poorly.

It seems there’s something of a trend for politicians and government officials to abuse the law in order to silence their critics in a relatively new form of libel chill. Many will remember similar cases such as Ontario Ombudsman Andre Marin and Toronto Police Constable Adam Josephs, aka Officer Bubbles have used legal and bureaucratic methods to silence their critics – and succeeded (at least in part), mainly because it costs too much to fight the virtually unlimited powers of the state. It’s a worry. Do we really want to be one of those countries in which not just criticizing the president, but any government functionary is a criminal offence?

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 2bp, FixedResets down 16bp and DeemedRetractibles off 8bp. Low-spread FixedResets dominated the bad side of a fairly lengthy – and overwhelmingly negative – Performance Highlights table. Volume was high.