PrefBlog

Surprisingly, a business-hostile government isn’t getting much help from business:

French companies aren’t investing much at home these days.

A no-growth economy had already damped spending when President Francois Hollande’s government late last month unveiled a budget that slaps companies with 10 billion euros ($13.1 billion) of tax increases for next year. Executives are returning the favor by suspending investments.

Perhaps Lapdog Carney could go over and give them some pointers.

Assiduous Reader AA sent me a link to a NYT article titled A Hard Landing for University Endowments:

Today, it’s hard to find a college or university that stuck with the older and far simpler allocation between stocks and bonds. Hedge funds alone currently have what is estimated at over $2 trillion in assets, much of it from large institutions.
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Even more startling, data compiled by the National Association of College and University Business Officers for the 2011 fiscal year (the most recent available) show that large, medium and small endowments all underperformed a simple mix of 60 percent stocks and 40 percent bonds over one-, three-and five–year periods. The 91 percent of endowments with less than $1 billion in assets underperformed in every time period since records have been maintained. Given the weak results being reported this year, that underperformance is likely to be even more pronounced when the fiscal year 2012 results are included.

I don’t think it’s necessary to resort to fancy arguments like “first-mover advantage” and “changing market” to explain this. I suggest that some smart guys who knew what they were doing had the idea and did very well. Then the salesmen moved in …

DBRS confirmed NA at Pfd-2:

National’s asset quality metrics, with respect to its lending operation, outperformed most of its peers through the recession and continue to do so. National’s capital metrics have declined slightly over the first nine months of 2012 largely as a result of the application of IFRS, increased risk-weighted assets driven by organic loan growth and the acquisition of a 35% interest in Fiera Capital Corporation. However, the Bank’s tangible common equity and Tier 1 ratios still remain within the middle of the Canadian bank peer group and compare favourably relative to international peers, at 9.5% and 12.7%, respectively.

National’s long-term deposits and senior debt rating at AA (low) is composed of an Intrinsic Assessment of A (high) and a Support Assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada), which results in a one notch increase from the Intrinsic Assessment to the Issuer Rating, Deposits and Senior Debt and Subordinated Debt ratings.

It was another mildly positive day for the Canadian preferred share market, with PerpetualPremiums up 6bp, FixedResets flat and DeemedRetractibles gaining 5bp. Volatility was minor. Volume was very low.

Red letter day! There was an intelligent quote about high frequency trading in the papers:

Murray Leith, director of investment research at Vancouver-based Odlum Brown Ltd., agrees that markets should be policed properly to eliminate flash crashes and maintain investor confidence.

But, he says, he’s interested in finding investments that are undervalued but will rise to their true value in the long term, as opposed to the minute machinations that high-frequency traders are interested in.

“If I see something that I like at the right price, I buy it. If it’s not at the right price, I don’t. It’s as simple as that.”

He adds that there can even be a bright side of volatility – “it potentially creates opportunity that may not otherwise exist.”

Naturally, this was balanced by something moronic:

Opponents cite increased volatility in the markets, which makes pricing less efficient, as well as the erosion of investor confidence – especially because of a few unsettling, extreme events in which high-frequency trading played a role. One of those occurred in August, when Knight Capital Group Inc. lost $440-million (U.S.) after an upgrade to its computerized trading system went awry, causing share prices on the New York Stock Exchange to fluctuate wildly after Knight put out a huge number of buy and sell orders.

The Knight Capital Group whoopsy had nothing to do with High Frequency Trading. Nothing.

And something a little puzzling…

To really understand high-frequency trading, investors have to grasp three concepts about markets, [professor at the University of Toronto’s Rotman School of Management who also holds the John H. Watson chair in value investing] Prof. [Eric] Kirzner says.
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The third is that there are two basic types of traders, high-frequency and slow-moving. For the latter, think mutual-fund companies, pension funds and everyday retail investors.

Happy to agree that everyday retail investors are slow-moving. But by and large, HFT helps them by narrowing the spread; retail is very fond of market orders.

But slow-moving mutual-fund companies and pension funds? Why are they slow moving? Do they not charge high enough fees to compete properly? If their incompetence is having a measurable effect on performance, why aren’t they fired?

There’s some noticable capital flight from Greece:

Coca-Cola Hellenic Bottling SA, (EEEK) the world’s second-largest Coca-Cola bottler, plans to move its main stock listing from Athens to London as Greece’s largest company by market value flees the epicenter of Europe’s debt crisis.

The move will make it eligible for inclusion in the benchmark FTSE 100 Index. A new company established in Switzerland by one of the bottler’s main shareholders will make a share-exchange offer for Coca-Cola Hellenic and seek a primary listing in London, according to an Athens bourse filing today. Coca-Cola HBC AG will also seek to list in New York.
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Coca-Cola HBC operates in 28 countries across three continents and employs more than 40,000 people, generating sales last year of 6.9 billion euros ($8.9 billion). Ninety-five percent of its business and shareholders are outside Greece.

Switzerland was chosen as the location for the new company because of its stable economy and regulatory environment and the ease of doing business there, according to the statement. The country is among the existing markets of the business.

Here’s why we need space exploration: one-hundred bazillion carats!

New research suggests that a massive, star-scorched planet in the Cancer constellation, not far from our solar system, is made in large part of diamonds, opening new vistas on the way scientists understand how planets are created.

The planet, 55 Cancri e, is twice the size of Earth and so rich in carbon that it holds at least three times our planet’s mass in diamonds, according to a new paper that has been accepted for publication in the journal Astrophysical Journal Letters.
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“We’re talking about a rocky planet. Not much gas, almost entirely solid. The outermost layer is at an extremely high temperature … There could also be a lot of diamonds on the surface because of the geophysical movements in the interior. The diamonds could come to the surface very easily,” Dr. [Nikku] Madhusudhan [a fellow at Yale University’s Center for Astronomy & Astrophysics] said in an interview.

“But just below the surface there is a very thick layer, about a third of the whole radius [of the planet], just in diamonds.”

It was a mildly positive day for the Canadian preferred share market, with PerpetualPremiums up 5bp, FixedResets flat and DeemedRetractibles gaining 2bp. Volume was low, despite the closing of two new issues, GWO.PR.R and BRF.PR.C.