PrefBlog

The Russians are bringing us new trends in financial computer hacking:

A group of Russian hackers infiltrated the servers of Dow Jones & Co., owner of the Wall Street Journal and several other news publications, and stole information to trade on before it became public, according to four people familiar with the matter.

The Federal Bureau of Investigation, Secret Service and the Securities and Exchange Commission are leading an investigation of the infiltration, according to the people. The probe began at least a year ago, one of them said.

Dow Jones, in a statement, said: “To the best of our knowledge, we have received no information from the authorities about any such alleged matter, and we are looking into whether there is any truth whatsoever to this report by a competitor news organization.”
…
Information embargoed by companies and the government for release at a later time could be valuable to traders looking to gain an edge over other market participants, as could stories being prepared on topics like mergers and acquisitions that move stock prices.
…
The hack investigation shows how quickly law enforcers are shifting to a new front in insider trading: cyberspace. Market-moving, nonpublic information used to trade hands in secret meetings. Hackers are now stealing sensitive information and selling it to traders. This new vulnerability in the financial markets is challenging law-enforcement officials who are trying to keep pace with cyber-criminals’ rapidly evolving moneymaking schemes.

For would-be inside traders, business journalists and data providers are a rich target. Potentially market-moving scoops often develop in-house for days or weeks, promising intruders a long pre-publication window to mine information and execute trades. Data being held for public release at a specified time can also be a gold mine in markets where the profitably of a trade is determined in a fraction of a second.

Life got a little better for preferred share investors today:

Click for Big

It was a glorious day for the Canadian preferred share market, with PerpetualDiscounts gaining 32bp, FixedResets winning 142bp and DeemedRetractibles up 120bp. The Performance Highlights table is as lengthy as one might expect. Volume was extremely heavy.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

Click for Big

Implied Volatility declined a lot today but remains high.

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.50 to be $0.78 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.86 cheap at its bid price of 11.72.

Click for Big

There was an incredible drop in Implied Volatility today – and it would be near zero if the calculation wasn’t distorted by the MFC.PR.F outlier. Dropping the outlier results in a very good fit:

Click for Big

Using the all-inclusive fit, the most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 14.50 to be 1.32 rich, while MFC.PR.L resetting at +216bp on 2019-6-19, is bid at 16.32 to be 0.68 cheap.

Click for Big

The fit on the BAM issues continues to be horrible!

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 14.90 to be $0.90 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.30 and appears to be $0.58 rich.

Click for Big

Implied Volatility declined substantially today but remains ridiculously high.

FTS.PR.M, with a spread of +248bp, and bid at 18.60, looks $0.39 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.24 and is $0.56 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.45%, with no outliers. The distribution is only slightly bimodal, with bank NVCC non-compliant pairs averaging -0.58% and other issues averaging -0.26%. There are three junk outliers above 0.50% and one below -1.50%.

Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

There are continued dovish expectations regarding the Fed’s next move:

The October rebound in global equities resumed, with U.S. stocks rising to a eight-week high amid bank earnings and growing speculation the Federal Reserve will delay raising interest rates until 2016. Treasuries fell and gold erased its loss for the year.
…
The probability of a Fed interest rate increase by the December policy meeting has dropped to 30 percent, down from 70 percent at the start of August, according to futures data compiled by Bloomberg. The slide worsened even after a gauge of U.S. core consumer prices advanced more than projected in September, while hiring data provided evidence of labor-market resilience.

My old buddy Doug Grieve, of long-time Nesbitt fame, mentioned on June 26 as becoming the manager of Lysander-Slater Preferred Share Dividend Fund, has now also been named as the manager of the Lysander-Slater Preferred Share ActivETF which has the awesome symbol PR.

Husky Energy, proud issuer of HSE.PR.A, HSE.PR.C, HSE.PR.E and HSE.PR.G, was confirmed at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Notes and Debentures rating of Husky Energy Inc. (Husky or the Company) at A (low) as well as its Commercial Paper rating at R-1 (low) and its Preferred Shares – Cumulative rating at Pfd-2 (low), all with Stable trends. DBRS believes that Husky is in a good position to ride the challenging commodity price environment among its domestic peers given (a) Husky’s relatively low leverage; (b) reasonable liquidity and no material long-term debt refinancing risk over the next three years; (c) strong earnings and cash flow contributions from the Liwan Gas Project (Liwan) offshore China and the Company’s downstream business, which are not tied directly to oil prices; and (d) the near completion of the major capital-intensive projects – Liwan and Sunrise Energy (Sunrise) – reducing capital expenditure (capex) commitments going forward. The Stable trend incorporates DBRS’s expectation that key credit metrics will weaken materially in 2015, but will remain above average among DBRS-rated investment-grade peers in Canada; however, a negative rating action could be taken if key credit metrics remain under pressure on a sustained basis.

It was a whole new world for Canadian preferred share investors today!

Click for Big

It was a very good day for the Canadian preferred share market, with PerpetualDiscounts gaining 28bp, FixedResets up 73bp and DeemedRetractibles winning 109bp. FixedResets dominated the nicer side of the Performance Highlights table. Volume was enormous.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

Click for Big

Implied Volatility declined today but remains high.

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.24 to be $0.93 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.66 cheap at its bid price of 11.68.

Click for Big

Implied Volatility remained at the highest level I am willing to consider today.

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 14.50 to be 0.91 rich, while MFC.PR.K resetting at +222bp on 2018-9-19, is bid at 16.32 to be 0.66 cheap.

Click for Big

The fit on the BAM issues continues to be horrible!

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 14.70 to be $0.90 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.30 and appears to be $0.69 rich.

Click for Big

Implied Volatility edged down today but remains ridiculously high.

FTS.PR.M, with a spread of +248bp, and bid at 18.09, looks $0.34 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.03 and is $0.46 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.55%, with no outliers after I changed the y-axis limits. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -0.85% and other issues averaging -0.14%. There are two junk outliers above 0.50%.

Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

There was an extremely benign inflation indicator in the States today:

Wholesale prices in the U.S. declined in September by the most since the start of the year as costs fell for gasoline, food and brokerage services.

The 0.5 percent decrease in the producer-price index was the biggest since January and followed no change in August, Labor Department figures showed Wednesday. The median forecast of economists surveyed by Bloomberg called for a 0.2 percent drop. Costs were down 1.1 percent over the past 12 months.
…
Energy expenses decreased 5.9 percent in September, the most since January, after falling 3.3 percent the month before. Food prices dropped 0.8 percent after a 0.3 percent gain. The costs of eggs slumped, while beef and veal prices plunged 7.9 percent, the most since January 2004.

Wholesale prices excluding these two components unexpectedly declined 0.3 percent. The median forecast in the Bloomberg survey called for a 0.1 percent gain. Those costs were up 0.8 percent from September 2014.

Goods prices, which have fallen for three straight months, slumped 1.2 percent in September. The costs of services dropped

0.4 percent, the most since February. More than a quarter of that decrease was due to slumping costs for securities brokerage, dealing and investment advice, the Labor Department said.

After eliminating food, energy and trade services to arrive at a reading that some economists prefer because it excludes one of the report’s most volatile components, wholesale costs also decreased 0.3 percent in September. That was the biggest decline since records began in 2013

“slumping costs for … investment advice”??? This isn’t a slow-down! This is a DEPRESSION!

And retail sales were sluggish:

Consumers in the U.S. tempered purchases at retailers in September, pocketing the savings from lower fuel costs and making for a weak finish to the third quarter.

The 0.1 percent gain followed little change in the prior month that was weaker than previously reported, Commerce Department figures showed Wednesday in Washington. The median forecast of 82 economists surveyed by Bloomberg called for a 0.2 percent advance. More than half of merchant categories showed decreases.

Sluggish sales may raise concern about the staying power of consumer spending, which accounts for about 70 percent of the economy, at a time overseas demand is also cooling. While job gains and cheap fuel may help to underpin purchases, a pickup in wages remains elusive as Federal Reserve policy makers are weighing whether to raise interest rates this year.

Naturally, this led the market to believe that maybe a rate hike isn’t imminent:

First Treasuries traders were banking on September for the Federal Reserve to raise interest rates. Then they turned their focus to December. Now even March is looking like a toss-up.

The drumbeat of weaker-than-forecast global economic data continued Wednesday as September U.S. retail sales fell short of analysts’ expectations. The report came after Fed Governor Daniel Tarullo, who votes on rate decisions, said Tuesday that he doesn’t currently favor an increase in 2015, even though Chair Janet Yellen has said a move would be warranted.

Traders’ bets that the Fed will lift its benchmark by year-end have dropped to less than a one-in-three chance, and aren’t much higher for January. For March, the probability has tumbled to about 50 percent, from 65 percent a month ago. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.

The uncertainty may be exacerbated by a disagreement regarding a basic tenet of economics:

On Monday, Governor Lael Brainard said that global risks warranted a more cautious stance from the central bank. The next day, fellow Governor Daniel Tarullo indicated that he expects it will be appropriate to keep rates on hold through year end.

The details of their dovish commentary are much more noteworthy, as both appear to disagree with Yellen’s description of what the Fed’s reaction mechanism ought to be.

At the heart of the matter is the extent to which the progress made in achieving one part of the central bank’s mandate (full employment) portends improvement in the other part (price stability, defined as an annual inflation rate of 2 percent).

The relationship between unemployment and inflation is typically understood in terms of the Phillips Curve, which holds that there is an inverse relationship between inflation and unemployment.

Yellen’s previous remarks suggest she thinks a firming labor market will indeed lead to higher levels of inflation.
…
The governors are much more skeptical.

“I do think under these circumstances it’s probably wise not to be counting so much on past correlations—things like the Phillips Curve, which really haven’t been operating very effectively for 10 years now—and instead to really look for some tangible evidence of, for example, pickups in wages or inflation that allow us to make informed decisions based on the evidence,” Tarullo said in an interview with CNBC.

Brainard issued what appeared to be an even more direct rebuttal.

“To be clear, I do not view the improvement in the labor market as a sufficient statistic for judging the outlook for inflation,” she said. “A variety of econometric estimates would suggest that the classic Phillips curve influence of resource utilization on inflation is, at best, very weak at the moment.”

Silver Bullion Trust has fired another round in its battle with Sprott (bolding from original):

Bruce Heagle, Chair of the Special Committee of the Board of Trustees of SBT stated: “Sprott’s recent claims of an “increased offer” are illusory; in reality, nothing has changed. Their supposed “premium consideration” of $0.025 per Unit is immaterial; it represents less than 0.3% of the current value of an SBT Unit, and would be more than offset by the higher annual management fees charged by Sprott. Sprott continues to offer no meaningful premium, would charge significantly higher management fees, strip Unitholders of virtually all their governance rights and expose certain U.S. Unitholders to higher tax risk. Rejecting Sprott’s self-serving, inadequate offer and retaining your SBT Units, characterized by an industry-leading expense ratio, superior bullion security and safeguards, and a sound, tax efficient structure, is the clear choice for long-term bullion investors.”

I’ll be very disappointed when the whole thing is resolved!

Element Financial, whose preferreds were recent added to the HIMIPref™ database, is shifting strategic priorities:

Element Financial Corporation (TSX:EFN) (“Element” or the “Company”), today announced that it has initiated a series of steps that will accelerate the transformation of the Company into North America’s leading fleet management and services enterprise with complementary commercial finance operations. Specifically, the Company has initiated a process to harvest capital from its Canadian commercial & vendor (“C&V”) operations for reinvestment in both organic growth and acquisition opportunities in its core fleet management business. These opportunities include the acquisition of existing fleet management businesses and portfolios as well as fleet services companies that have the potential to drive incremental service fee income for the Company. Concurrently, the Company will optimize the scale and focus of its non-fleet businesses to complement its core fleet management operations.

Some old research done for Parliament illustrates effective marginal tax rates for low income earners:

The “welfare wall” refers to the disincentives to work created by interaction between the system of social assistance and personal income taxation in Canada. Canadians who receive social assistance and subsequently accept low-paying employment face a series of consequences that could potentially make them worse off, including: higher income and payroll taxes; new work-related expenses such as transportation, clothing and childcare; reduced income support in the form of social assistance and income-tested refundable tax credits; and loss of in-kind benefits such as subsidized housing and prescription drugs.

This welfare wall can be demonstrated by estimating an individual’s effective marginal tax rate; that is, the costs associated with the next dollar of earned income. Figure 1 shows that, under the current system of social assistance and taxation in Canada, a single parent with one child who increases his/her earnings from $0 to $10,000 would lose an estimated 78 cents of every additional dollar earned. By comparison, an increase in earnings from $40,000 to $50,000 has an effective marginal tax rate of 41%.

The effective marginal tax rate of 78% on the FIRST $10,000 of earnings is, of course, ridiculous and points out the absurdity of things like the coming Toronto proposal for income-based pricing of bus passes, discussed yesterday, which will only increase the effective marginal rate by withdrawing subsidies as income increases. One suggestion that has some solid thinking behind it is for substantial refundable tax credits to replace social programmes:

The current tax system contains more than $80-billion of tax credits which are non-refundable, which means that low-income Canadians who do not have sufficient taxes owing cannot benefit from them in the same fashion as higher-income taxpayers. While tax filers will be most familiar with the basic personal amount at the top of Schedule 1 of the federal income tax form, other credits for age, eligible dependents, employment and education are also important.

Our recent research paper evaluates the effect of converting these non-refundable credits to refundable credits in the fashion of existing credits such as the Goods and Services Tax Credit and the Working Income Tax Credit and the recently replaced National Child Benefit. A refundable credit simply converts any excess between the credit and taxes owing to a refundable benefit, allowing low-income tax filers to realize the benefits of these tax credits that already accrue to higher-income tax filers.

The paper, titled THE IMPACT OF CONVERTING FEDERAL NON-REFUNDABLE TAX CREDITS INTO REFUNDABLE CREDITS by Wayne Simpson and Harvey Stevens is summarized:

With economic inequality on the rise in Canada, the federal government needs to consider innovative solutions. One possibility for improving the tax-transfer system involves refundable tax credits (RTCs). Making all tax credits refundable wouldn’t require Ottawa to introduce new tax measures; the Canadian tax system already contains a mix of RTCs and NRTCs, so the government could simply continue its practice of designing tax credit programs to be refundable.

Using Statistics Canada’s Social Policy Simulation Database and Model, this paper examines the impacts and cost of converting NRTCs to RTCs, with and without an income exemption equal to 25 percent of the before-tax low-income standard for a census family, the Census Family Low-Income Line.

Under the Option Without Exemption (OW/OE), RTC recipients are taxed at a single rate of 15 percent, regardless of family size, right up to the Line. Under the Option With Exemption (OWE), RTC recipients are taxed at zero percent up to 25 percent of the Line and at a single rate of 20 percent, regardless of family size, up to 100 percent of the Line.

The incremental cost of switching NRTCs to RTCs under the OW/OE is $6.6 billion, as additional benefits are provided to 6.4 million families — slightly less than 37 percent of all families. The cost of the OWE is $7.2 billion, as benefits flow to slightly more families — 6.45 million. However, the percentage of benefits reaching low-income families is much higher under the OWE (69 percent vs. 49 percent). Additionally, the OWE provides an average of nine percent more RTC benefits to low-income tax filers, making it clearly the superior option for poverty reduction. Moreover, the paper shows that alternative conversion schemes that set benefit reduction rates to differ by family size can further increase the benefits to low-income families at a lower overall cost.

Such changes would elicit a labour-supply response in terms of a reduction in hours worked, and while the effect is smaller under the less expensive OW/OE, the difference between the two options is slight.

This paper simulates the conversion of NRTCs to RTCs in comprehensive detail, besides providing practical advice on how such a shift would be funded. It offers valuable food for thought on an issue that is increasingly critical to Canadian society.

“Trigger warnings” have become a popular bone of contention at universities and I’ve decided to experiment with their use myself. So, before you proceed to read about the day’s market action:

Click for Big

It was yet another crummy day for the Canadian preferred share market, with PerpetualDiscounts and FixedResets both down 59bp and DeemedRetractibles losing 80bp. The Performance Highlights table is … well, you know. It’s the Performance Highlights table. It highlights performance. Of particular interest today though, what the amount of churn; some issues did really, really well! Volume was very extremely awfully high – this is like tax-loss selling season! And perhaps it is!

PerpetualDiscounts now yield 5.90%, equivalent to 7.67% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.25%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 340bp, a number I didn’t really expect to see ever again, a significant widening from the 330bp reported October 7.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

Click for Big

Implied Volatility declined today with the normalization of the bid on TRP.PR.D, but remained ridiculously high.

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 16.50 to be $0.63 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.75 cheap at its bid price of 11.33.

Click for Big

Implied Volatility shot upwards today, propelled by excellent relative performance of MFC.PR.F, which is featured on the Performance Highlights table.

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 14.40 to be 1.04 rich, while MFC.PR.K resetting at +222bp on 2018-9-19, is bid at 15.86 to be 0.96 cheap.

Click for Big

The fit on the BAM issues continues to be horrible!

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 14.60 to be $0.90 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.19 and appears to be $0.86 rich.

Click for Big

Implied Volatility edged up again today to the maximum level I am willing to discuss.

FTS.PR.H, with a spread of +145bp, and bid at 13.70, looks $0.16 expensive and resets 2020-6-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.01 and is $0.42 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.51%, with two outliers above 0.00% and none below -2.00%. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -0.82% and other issues averaging -0.07%. There are three junk outliers above 0.00%.

Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

Singapore is being affected by low growth in Asia:

Singapore’s central bank eased monetary policy for the second time this year as the economy narrowly avoided a technical recession, saying weakening prospects for global growth will pose “headwinds” in the coming months.

The Monetary Authority of Singapore, which uses the currency rather than interest rates as its main policy tool, said Wednesday it will reduce “slightly” the pace of appreciation in the local dollar versus those of its trading partners. Gross domestic product unexpectedly rose an annualized 0.1 percent in the three months through September from the previous quarter, when it shrank a revised 2.5 percent, the trade ministry said in a separate statement.

“The Singapore economy is projected to expand at a modest pace in 2015 and 2016, with growth slightly weaker than earlier envisaged,” the central bank said. “The subdued global growth will exert a drag on the external-oriented sectors in Singapore in the quarters ahead.”

On a brighter note, today we learned what millennials do at the office all day, which has heretofore been very mysterious:

Last year, Playboy.com cleaned up its website to make it “safe for work,” and has since seen its monthly unique Web visitors rise fivefold. The median age of those visitors dropped to 30 years-old from 47 as a result — “an attractive demographic for advertisers,” the company said.

Of all the do-gooder strategies ever devised, there has never been anything as cruel as income-geared pricing. This mechanism traps the poor inextricably in their circumstances, since any incremental improvements they can make to income – by getting a slightly better job, or by working slightly more hours – will immediately be taxed away by reduction of benefits. So, naturally, guess what Toronto City Council is plotting?

As the TTC board contemplates another New Year’s fare increase — the seventh in as many years — there’s growing concern that the rising cost of transportation is eating through the empty pockets of its neediest riders at a disproportionate rate.

Many cities offer an income-based concession pass. Is it time for Toronto to do the same?

Still, it was nice to see Canadian preferred share investors waving the flag today:

Click for Big

It was a hideous day for the Canadian preferred share market, with PerpetualDiscounts off 27bp, FixedResets losing a stunning 186bp and DeemedRetractibles down 31bp. An extraordinarily long Performance Highlights table is dominated by losing FixedResets, as might be expected. Volume was extremely high.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

Click for Big

Implied Volatility remained ridiculous.

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 14.83 to be $0.52 rich, while TRP.PR.D, resetting 2019-4-30 at +238, is $0.61 cheap at its bid price of 15.86.

Click for Big

Implied Volatility re-established itself at higher levels today following the precipitous decline on Friday.

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 13.69 to be 0.59 rich, while MFC.PR.K resetting at +222bp on 2018-9-19, is bid at 16.01 to be 0.74 cheap.

Click for Big

The fit on the BAM issues continues to be horrible!

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 14.92 to be $0.82 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.01 and appears to be $0.69 rich.

Click for Big

Implied Volatility edged up again today and is ridiculously high.

FTS.PR.K, with a spread of +205bp, and bid at 16.51, looks $0.23 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.16 and is $0.46 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.58%, with four outliers above 0.00% and none below -2.00%. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -0.90% and other issues averaging -0.13%. There are three junk outliers above 0.00%.

Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

Margin debt in the US is declining:

NYSE margin debt surged from $182 billion to $505 billion in the six years ended in June 2015, roughly tracing the trajectory of the S&P 500, which tripled over the period. The biggest gains came in 2013, with credit rising 35 percent as U.S. stocks climbed 30 percent for the best returns in 16 years.

Since June, it’s been the other way around, with margin debt falling 6.3 percent to $473 billion at the NYSE’s last update, which covered August. The S&P 500 slid 4.4 percent at the end of that period as stocks entered a correction.

I’ll need to be convinced that this means anything as a market-timing indicator, as is often proclaimed but I’ll accept it as a rough measure of retail sentiment. It interested me due to a BIS working paper by Fernando Avalos, Ramon Moreno and Tania Romero titled Leverage on the buy side:

This paper investigates the microeconomic determinants of leverage decisions by asset managers. Investment funds (the “buy side”) have significantly increased their share of global capital flows in recent years. Unconventional monetary policies in advanced economies have squeezed returns while reducing borrowing costs, which in principle creates an incentive for asset managers to use more leverage. We start by studying the recent behaviour of fund leverage in different asset categories at an aggregate level. Leverage appears to have increased significantly in funds focused on the fixed income markets of emerging economies. Then we analyse the microeconomic factors that shape the leverage decision. In line with theory, we find that leverage rises with expected returns, and falls with market risk and borrowing costs. Transaction costs are also mentioned in the literature as another factor that should inhibit leverage. Lacking the requisite data, we introduce as proxies changes in capital controls and macroprudential policies, because they tend to affect expected returns in comparable ways. We find that tighter capital controls on inflows increase leverage rather than decrease it, but that macroprudential measures have no discernible effect. Finally, we discuss these results and their policy implications.
…
Funds dedicated to global markets or advanced economies had little debt in their capital structure, whereas debt in leveraged EME fixed income funds was close to 30 percent of AUM towards the end of our sample period. The leverage ratio of EME fixed income funds surged after 2009 before falling abruptly back in 2014, although current levels are still much higher than before the surge. The number of funds using leverage is relatively small in our sample, but their size is about three times that of their unleveraged peers. They control more than 30 percent of AUM in their sector (down from 50 percent around 2010), making them quite significant players in their target markets.

Meanwhile Fed officials seem anxious to emphasize that their hesitation in hiking rates in September due to concerns over global risks (discussed yesterday) should not be taken as an indication of what will happen in the year’s remaining two FOMC meetings:

Federal Reserve Bank of Richmond President Jeffrey Lacker said the U.S. is already at full employment and the central bank may risk overheating the economy as it attempts to drive additional job gains.

With the unemployment rate at 5.1 percent, the central bank has achieved its goal and “exhausted relevant slack in the labor market,” the Richmond Fed chief said.

“We’re there,” Lacker said in an interview in his office Thursday, referring to the central bank’s mandate to lower joblessness to the level consistent with stable price pressures. The median forecast of that rate among Fed officials is 4.9 percent, according to estimates released following last month’s meeting of the policy-making Federal Open Market Committee.

“Pushing on to wring more slack out — there is some risks associated with that,” said Lacker. Inflation pressures may emerge with a lag, but the “risks can be very real.”

The Richmond Fed chief dissented at the FOMC’s September meeting, preferring a 0.25 percentage point increase in the federal funds rate.

And Dudley of the NY Fed provided supporting fire:

Federal Reserve Bank of New York President William C. Dudley said he expects the U.S. central bank to raise interest rates by December, echoing comments by fellow regional Fed chief Dennis Lockart in Atlanta, while cautioning that this was not a pledge to action and will depend on the economy staying on track.

Dudley told CNBC television in an interview Friday that he was still in the 2015 liftoff camp.

“Based on my forecast, yes I am, but it’s a forecast. And we’re going to get a lot of data between now and December,” he said. “It’s not a commitment.”
…
Last month’s FOMC decision, and a disappointing September U.S. employment report, has sapped investors’ confidence the Fed will be able to raise rates this year, as Fed Chair Janet Yellen has said she expects will be warranted. The probability of a 2015 hike is now priced around 40 percent in federal funds futures markets, compared to above 60 percent ahead of last month’s Fed meeting, based on the assumption that the effective fed funds rate will be 0.375 percent after liftoff.

Dudley said the key to liftoff will be whether the labor market continues to improve, thereby putting more upward pressure on wages and inflation. Last month’s jobs report was “definitely weaker,” but even monthly gains of 120,000 or 150,000 are enough to continue to push the U.S. unemployment rate lower, he said.

Lockhart says the same:

Federal Reserve Bank of Atlanta President Dennis Lockhart said the first interest rate increase since 2006 will likely be warranted later this month or in December.

“The economy remains on a satisfactory track, and, speaking for myself, I see a liftoff decision later this year at the October or December FOMC meetings as likely appropriate,” Lockhart said in prepared remarks Friday in New York, referring to the Federal Open Market Committee.
…
“The ambiguity of the moment reinforces the need to closely watch the vital signs of the economy over the coming weeks to determine if the outlook has changed,” he said.

Lockhart, who has never dissented, said consumer activity will be a key signal that the U.S. economy can sustain its momentum despite the global slowdown.

“The consumer-based dimension of the economy has been robust for several months,” Lockhart said to the Society of American Business Editors and Writers, even as manufacturing and exports have been hurt by a stronger U.S. dollar.

The Atlanta Fed’s tracking estimate for the third quarter is a “relatively soft 1.1 percent,” though much of the weakness is due to a swing in inventories.

Alan Kreuger of Princeton wrote an op-ed in the NYT advocating a $12 minimum wage:

I am frequently asked, “How high can the minimum wage go without jeopardizing employment of low-wage workers? And at what level would further minimum wage increases result in more job losses than wage gains, lowering the earnings of low-wage workers as a whole?”

Although available research cannot precisely answer these questions, I am confident that a federal minimum wage that rises to around $12 an hour over the next five years or so would not have a meaningful negative effect on United States employment. One reason for this judgment is that around 140 research projects commissioned by Britain’s independent Low Pay Commission have found that the minimum wage “has led to higher than average wage increases for the lowest paid, with little evidence of adverse effects on employment or the economy.” A $12-per-hour minimum wage in the United States phased in over several years would be in the same ballpark as Britain’s minimum wage today.

But $15 an hour is beyond international experience, and could well be counterproductive. Although some high-wage cities and states could probably absorb a $15-an-hour minimum wage with little or no job loss, it is far from clear that the same could be said for every state, city and town in the United States.

I think the emphasis on the redistributive effects of the minimum wage are misguided; we should not be asking how to maximize the minimum wage subject to avoiding job losses; but rather, how to increase the minimum wage in order to force higher productivity at the low end of the job scale. I’m not suggesting that all productivity gains in the economy should be reflected in the minimum wage – that’s obviously a ridiculous argument – but some of the gains can be enforced.

Brookfield Renewable Energy Partners L.P., proud indirect issuer of BRF.PR.A, BRF.PR.B, BRF.PR.C, BRF.PR.E and BRF.PR.F, has announced:

an agreement to acquire a hydroelectric portfolio in Pennsylvania from Talen Energy for $860 million. Brookfield Renewable will acquire and fund the transaction with institutional partners and maintain an economic interest in the portfolio of approximately 40 percent. A portion of the purchase price will be funded with third party investment grade, non-recourse financing expected to close concurrently with the transaction.

The portfolio consists of two facilities, the 252 MW Holtwood station on the Susquehanna River and the 40 MW Wallenpaupack station on Lake Wallenpaupack in the Pocono Mountains, with a combined expected average annual generation of approximately 1.1 million megawatt hours. The acquisition provides a strong fit with Brookfield Renewable’s 417 MW Safe Harbor facility located eight miles upstream from Holtwood. All output is currently sold into PJM and the portfolio benefits from a diverse revenue stream including energy, capacity, renewable energy credits and ancillary services. Both Holtwood and Wallenpaupack have long-term FERC operating licenses through 2030 and 2045, respectively.

DBRS comments:

DBRS Limited (DBRS) today notes that Brookfield Renewable Energy Partners L.P. (BREP or the Company, rated BBB (high)) has announced its acquisition of a 292-megawatt (MW) hydroelectric portfolio in Pennsylvania (the Acquisition). The Acquisition is not expected to have a material impact on BREP’s rating. DBRS views the Acquisition as modestly negative to BREP’s business risk assessment (BRA), as the generation output from the acquired assets (representing approximately 4% of total pro-forma generation) is exposed to the merchant power market. However, DBRS expects BREP to prudently finance the Acquisition in order to be in line with DBRS’s 20% deconsolidated debt-to-capital threshold and to maintain a financial risk assessment (FRA) that remains supportive of the current rating.

TransCanada also announced an acquisition:

TransCanada Corporation (TSX:TRP)(NYSE:TRP) (TransCanada) today announced that it has reached an agreement to acquire the Ironwood natural gas fired, combined cycle power plant in Lebanon, Pennsylvania, with a nameplate capacity of 778 megawatts (MW), from Talen Energy Corporation (NYSE:TLN) for US$654 million. At closing, US$42 million in debt will be assumed and then repaid within 45 days of closing out of funds placed into escrow by the seller.

“This acquisition presents a unique opportunity in the current market environment and is a natural extension of our U.S. northeast power business, strengthening our overall portfolio of assets in the region,” said Russ Girling, TransCanada’s president and chief executive officer. “This relatively new and highly efficient gas-fired power plant provides us with a solid platform from which to continue to grow our already substantial wholesale, commercial and industrial customer base in this market area.”

Sure beats trying to promote Keystone! Jim Polson and Rebecca Penty of Bloomberg comment:

Companies from the Great White North are attracted by fast-growing power demand in parts of the U.S. and a regulatory model that allows bigger profits for utility monopolies. Their purchases are propping up sale values of U.S. independent producers amid a slowdown in the sector, according to UBS Securities LLC.
…
Canadian energy companies, pension funds and private equity firms are also more willing than U.S. utility owners to bank on the volatile earnings from power plants that sell into U.S. wholesale markets, said Kit Konolige, senior utility analyst for Bloomberg Intelligence. TransCanada and Brookfield bought so-called merchant plants that had been owned by PPL Corp. before it spun off Talen Energy Corp. in June to focus on more predictable utility businesses.

And it’s not just power that Canadians are after. They’re also buying up U.S. oil and natural gas properties. Canada Pension Plan Investment Board, the country’s largest pension fund, said Thursday it isn’t done shopping for energy assets after committing almost $2 billion to the industry in the last two weeks. That includes a purchase announced Thursday of oil and gas producing properties in Colorado from Encana Corp.

Talen extracted “top dollar” for its deals this week, UBS analysts led by Julien Dumoulin-Smith wrote in a note.

So there’s lots of capital leaving Canada to buy power plants in the States. One has to wonder whether a more business-friendly regulatory environment would allow further increases in electricity exports while keeping the bucks and jobs up here:

U.S. electricity trade with Canada is increasing, providing more economic and reliability benefits to both the United States and Canada. Although the amount of electricity imported over the Canadian border is a small part of the overall U.S. power supply, the transmission connections linking Canada and the United States are an important component of the electricity markets in northern states.

Overall, Canada is a net exporter of electricity to the United States, and most of its power needs are met by hydroelectricity. Large hydroelectric projects in British Columbia, Manitoba, Quebec, and Newfoundland and Labrador have significantly increased the country’s generation capacity. On a net basis, Canada exports electricity mainly to New England, New York, and the Midwest states, while the United States exports electricity primarily from the Pacific Northwest states to the Canadian province of British Columbia.

As everybody knows, my company uses proprietary software (HIMIPref™) to examine the market for trade opportunities. Recently, PrefBlog’s corporate espionage department obtained information regarding hardware used for a similar purpose by other preferred share investors:

Click for Big

It was another hideous day for the Canadian preferred share market, with PerpetualDiscounts off 24bp, FixedResets losing 96bp and DeemedRetractibles down 29bp; the YTW on FixedResets is, incredibly, edging closer to the 5.00% mark. The Performance Highlights table is, of course, lengthy, with three MFC issues notable losers. Volume was well above average.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

Click for Big

Implied Volatility remained ridiculous.

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 14.75 to be $0.65 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.59 cheap at its bid price of 11.81.

Click for Big

The fit deteriorated today for MFC, with Implied Volatility plummeting; this isn’t really surprising, given the large losses experienced by the three MFC issues at the extreme bad end of the Performance Highlights table.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 21.38 to be 0.71 rich, while MFC.PR.K resetting at +222bp on 2018-9-19, is bid at 16.55 to be 0.78 cheap.

Click for Big

The fit on the BAM issues continues to be horrible!

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 15.00 to be $0.90 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.30 and appears to be $0.69 rich.

Click for Big

Implied Volatility jumped today and is ridiculously high.

FTS.PR.K, with a spread of +205bp, and bid at 16.81, looks $0.36 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.49 and is $0.30 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.99%, with two outliers above 0.00% and two below -2.00%. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -1.51% and other issues averaging -0.26%. There are three junk outliers above 0.00%.

Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

The Fed didn’t hike rates in September largely due to global risks:

Federal Reserve officials put off an interest-rate increase in September because of growing risks, mainly from China, to their outlook for economic growth and inflation even as they continued to say they were on track to raise the target later this year.

Policy makers “agreed that developments over the inter-meeting period had not materially altered the committee’s economic outlook,” according to minutes of the Sept. 16-17 session of the Federal Open Market Committee, released Thursday in Washington. Nonetheless, “the committee decided that it was prudent to wait for additional information confirming that the economic outlook had not deteriorated.”

The FOMC noted that domestic economic conditions, including data on consumer spending and housing, had continued to improve, and the labor market had reached or was close to the committee’s long-run estimates for unemployment.

Still, concerns over China and its potential spillover to other economies “were likely to depress U.S. net exports” and cause further strengthening of the dollar, which could damp inflation in the U.S.

The torrent of global money into California real estate is slowing:

International buyers are accounting for the smallest share of California home sales in at least eight years as prices climb and investors from China, the biggest source of foreign purchases, slow buying, according to the state’s Realtors group.

The share of international buyers fell this year to less than 4 percent, compared with a peak of 8 percent in 2013, the California Association of Realtors said in a report Thursday. The findings are based on a survey conducted in June of about 1,000 real estate agents. Since 2008, the first year agents were surveyed on the subject, results have shown foreigners representing at least 5 percent of transactions.

An influx of foreign money has contributed to soaring real estate prices in the largest U.S. state, particularly in coastal areas where demand is high and new inventory is limited. Buyers from mainland China, Hong Kong and Taiwan made up 43 percent of international purchases in California this year, followed by 8 percent each from Mexico and South Korea, according to the survey.
…
The median price of a California home is expected to climb 6.5 percent this year to $476,300, making it harder to find deals, according to Appleton-Young. Chinese buyers have focused their purchasing on a few areas such as the San Gabriel Valley and Irvine, outside Los Angeles, and parts of the San Francisco Bay area with reputations for quality schools.

Across the U.S., buyers from China, Hong Kong and Taiwan spent an estimated $28.6 billion on homes in the 12 months through March, the National Association of Realtors reported in June, more than double the $11.2 billion spent by No. 2 Canada. The average price was $831,800 for Chinese purchasers, compared with $499,600 for all international buyers.

California accounted for 16 percent of U.S. sales to foreign buyers, behind Florida, which had 21 percent, the national association’s report said.

Let’s hope that some of that missing money finds its way into Canada!

Hillary Clinton wrote an op-ed outlining her attack on markets:

My plan would also give regulators the authority they need to reorganize, downsize or even break apart any financial institution that is too large and risky to be managed effectively. It is a comprehensive and flexible approach. It allows regulators to adapt to changing markets and help ensure that large financial firms never pose a danger to our entire economy.

Not because they’re in trouble – because they’re too large and risky! Coming up next … jail terms for those likely to commit an offence! Matt Levine of Bloomberg opines:

And yet you can see the populist appeal. Wall Street, to a lot of people, is Wall Street, and any attack on “Wall Street” sounds good. The political desire is to have a certain quantity of “tough on Wall Street,” but what actually goes into that toughness is arbitrary and unimportant. So Clinton also wants to “reinstate the ‘swaps push-out’ rule for banks’ derivatives trading, which was repealed at the behest of the banking lobby in last year’s budget deal.” I have long thought that swaps push-out is the purest piece of symbolic emotional identification in financial regulation, and I still think that, but for precisely that reason it resonates. No one knows what it does, and no one thinks that it matters, so it is useful as a pure abstract marker of what team you’re on.

But for those of us who are more interested in finance than in politics, this just seems weird. Wall Street is not a monolith, and being “tough on Wall Street” makes no sense. Regulating the parts of Wall Street that you don’t like can help out the parts of Wall Street that you do like. Lots of hedge fund managers will be thrilled by a crackdown on high-frequency trading.15 Cracking down on small automated competitors to banks might be good for banks. There are Wall Street winners and Wall Street losers to all sorts of Wall Street regulation, and a pure quantity theory of toughness elides those differences.

Canada’s wealth management industry is asking the Ontario government for tighter regulations to restrict competition in the wealth management industry:

Canada’s wealth management industry is asking the Ontario government for tighter regulations governing financial planners and advisers.

Earlier this year, the province launched an expert committee to review the regulations, and a number of financial industry groups have responded by asking the government to enact a general legislative framework for advisers and planners.

Currently, throughout most of Canada, no general legal framework exists to regulate the activities of individuals who offer financial planning, advice and services. That means that in every province (excluding Quebec) any individual can call himself a financial planner – regardless of certification, designation or educational background.

The absence of a legal framework has raised questions within the industry about proficiency, quality standards and potential conflicts of interest.

… and competition from outfits that are not banks. That’s a real problem. However, the banks have shown their willingness in the past to pay regulators to expand their hegemony over the financial system, so guess what’s going to happen next?

Here’s a feel-good story about Canadian service sector innovation:

Like everyone, Cris Jucan has had his share of frustrating restaurant experiences. He remembers one vividly, a few years ago, when he and his friends were sitting around on a patio waiting to order drinks.

They joked that one of them should call the restaurant – on the phone – and ask that a server be sent over. That’s when the veritable light bulb went off.

Mr. Jucan, with his background in IT, wasted no time in founding Tacit Innovations, a startup that would seek to improve the restaurant experience by allowing patrons to browse menus and order meals with their phones.
…
Toronto-based Tacit Innovations, now up to 15 employees, is one of a growing number of companies tapping into the increasing tech savviness of restaurant owners and their desire to improve efficiencies, profits and customer experiences.

Veritable light bulb? I believe the writer meant “proverbial”.

But how about that preferred share market, eh? It was a walk in the park!

Click for Big

The Canadian preferred share market was hammered today, with PerpetualDiscounts off 45bp, FixedResets losing 169bp and DeemedRetractibles down 78bp. I cannot find sufficient superlatives to describe the Performance Highlights table. Volume was very high.

It is possible that the market was reacting to the news of the new private placement from BMO, which pays 5.85% … if this is a dividend and the bank needs the money that much, then the drop is justified. If the payments are taxed as interest, not so much. I don’t know. Or it could be the market just going down because it felt like it. I don’t know about that, either.

On a cheerier note, the increases in observed Implied Volatility suggest to me that we’re seeing some bottom feeding in the market, with the speculators (and, perhaps, long term buyers) seeking out the lowest-spread, lowest-priced issues (because then they get more leverage to future increases in GOC-5) and supporting their price relative to that of their higher-spread, higher-priced cousins. If so, it implies heightened awareness … and it is also possible that the new BMO issue represents an institutional desire to get in on the action with some serious money. This is what will eventually turn the tide, of course. But not yet!

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

Click for Big

Implied Volatility rocketed upwards today and is now ridiculous.

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 14.55 to be $0.49 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.52 cheap at its bid price of 11.83.

Click for Big

Another good fit today for MFC, with Implied Volatility jumping up.

Most expensive is MFC.PR.M, resetting at +236bp on 2019-12-19, bid at 19.02 to be 0.81 rich, while MFC.PR.J resetting at +261bp on 2018-3-19, is bid at 18.29 to be 0.89 cheap.

Click for Big

The fit on the BAM issues continues to be horrible, and Implied Volatility actually declined! But the relationship between the BAM FixedResets is just a mess, so I’m not taking it too seriously.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 15.01 to be $0.87 cheap. BAM.PR.X, resetting at +180bp on 2017-6-30 is bid at 14.03 and appears to be $0.67 rich.

Click for Big

Implied Volatility declined today but remains ridiculously high.

FTS.PR.K, with a spread of +205bp, and bid at 16.70, looks $0.21 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.70 and is $0.14 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.00%, with two outliers above 0.00% and two below -2.00%. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -1.55% and other issues averaging -0.23%. There are three junk outliers above 0.00%.

Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?