PrefBlog

There’s a scuffle about a Greek default:

European Central Bank officials ruled out a Greek debt restructuring, clashing with political leaders over a solution to the sovereign financial crisis.

“A Greek debt restructuring is not the appropriate way forward — it would create a catastrophe” because it would damage the banking system, ECB Executive Board member Juergen Stark said today in Lagonissi, Greece. Fellow board member Lorenzo Bini Smaghi said in Milan that “a solution for reducing debt but not paying for it will not work.”

Now, I will not claim that I’m the world’s greatest scholar on the debt crisis, but that seems to me to be the first official admission that the purpose of the various bail-outs is to save the banks. Anybody have anything both earlier and more explicit?

More gloomy punditry on US housing:

More than half U.S. homeowners and renters say housing won’t recover until at least 2014, reflecting a deepening pessimism about the real estate market, according to a survey by Trulia Inc. and RealtyTrac Inc.

The survey, taken in April, found that 54 percent of respondents don’t expect a recovery for at least three years, up from 34 percent in November, the two real estate data companies said today. Those who see a turnaround by the end of next year fell to 15 percent from 27 percent.

The housing market is weakening as near record-low interest rates and falling prices fail to boost demand after the expiration of a federal tax credit for homebuyers last year. Values will come under more pressure as 1.8 million properties that are delinquent or in foreclosure are added to the inventory of unsold homes, according to a March estimate by CoreLogic Inc., a real estate information firm in Santa Ana, California.

The iPad has been extraordinarily disruptive:

The iPad is wreaking havoc on the personal-computer market.

Hewlett-Packard Co. (HPQ)’s consumer PC sales plunged 23 percent last quarter, and the company lopped $1 billion off its annual sales forecast. And while rival Dell Inc. (DELL) beat analysts’ estimates because of corporate demand, its sales to consumers slumped 7.5 percent. More than 70 million tablets like the Apple Inc. (AAPL) iPad will be sold in 2011, a total that will balloon to 246 million in three years, Jefferies & Co. said yesterday.

You don’t need a full-blown computer to use eMail or look at dirty pictures on the internet!

There’s sales parties, sure. And then there’s REALLY GOOD sales parties!

A Munich Re unit hosted about 20 prostitutes at a Budapest party to reward the insurer’s high- performing agents, a spokesman said.
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Ergo hosted the party for about 100 guests at the historic Gellert spa, Handelsblatt reported in a preview of an article to be published today. Women wore color-coded armbands, the newspaper said, citing unidentified guests, with red for hostesses, yellow for those available for sexual favors and white for women reserved for executives and top agents. After each trip to beds set up near the thermal baths, a woman would receive a stamp on her forearm, the paper reported.

And, just to get even further off topic, The Periodic Table of Videos is a great website!

It was a sharply mixed day for the Canadian preferred share market, with PerpetualDiscounts winning 20bp, FixedResets losing 17bp, and DeemedRetractibles ahead 11bp. The Performance Highlights table is more interesting than usual, but still nothing like the glory days of late 4Q08 / 1Q09, which will be treasured in my memory for as long as I still have one.

PerpetualDiscounts now yield 5.51%, equivalent to 7.16% interest at the standard equivalency factor of 1.3x. Long Corporates now yield a little under 5.4% (maybe I should say, a little over 5.35%), so the pre-tax interest-equivalent spread is now about 180bp, about the same as reported on May 11.

SNP Split Corp has announced:

The Capital Shares and Preferred Shares will be redeemed by the Company on June 3, 2011 (the “Redemption Date”) in accordance with the redemption provisions of the shares. Pursuant to these provisions, the Preferred Shares will be redeemed at a price per shares equal to the lesser of $10.25 and the Net Asset Value per Unit. The Capital Shares will be redeemed at a price equal to the amount (for every two capital shares) by which the Net Asset Value per unit exceeds $10.25.

A further press release will be issued by the Company in connection with the redemption prices on June 2, 2011. Payment of the amounts due to holders of Capital Shares and Preferred Shares will be made by the Company on June 3, 2011.

SNP Split Corp. is a mutual fund corporation created to hold a portfolio of common shares (the “Portfolio Shares”) of the companies that make up the S&P 100 Index. The Company generates quarterly fixed cumulative preferential distributions for the Class B Preferred Shareholders and provides the Capital Shareholders with a leveraged investment, the value of which is linked to changes in the market price of the Portfolio Shares.

The NAV is 18.42 as of May 12, so redemption at par sounds like a good bet.

SNP.PR.V was last mentioned on PrefBlog last May, when there was a partial redemption call. SNP.PR.V is not tracked by HIMIPref™.

Update, 2011-6-6: Redeemed:

The Board of Directors of SNP Split Corp. (the “Company”) has today announced that the redemption prices for all outstanding Capital Shares and Preferred Shares to be paid on June 3, 2011 are as follows:

Redemption Price per Preferred Share: US$10.25

Redemption Price per Capital Share: US$3.9418

Glad to see that some people take piracy seriously:

About 20 percent of ships in the Indian Ocean and Gulf of Aden will use armed guards within the next 18 months, up from 12 percent, Peter Cook, spokesman for the Security Association for the Maritime Industry, said after a presentation yesterday in London.
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There have been 145 attacks and 22 ships hijacked by Somali pirates in the Indian Ocean so far this year, according to the International Maritime Organization, the shipping division of the United Nations. Somali pirates added at least $2.4 billion to transportation costs in 2010 as ships were diverted to avoid attacks off east Africa, said One Earth, a non-profit group.

The IMO, which had advised shipowners to avoid using armed guards, will probably approve vetting procedures for security operators this week, paving the way for their increased use, Cook said. The organization will discuss guidelines for hiring private armed guards this week, it said by e-mail on May 9.

Used to be that governments understood that their main business was promoting trade. Not any more.

There are some worries about the Toronto condo market:

Worries about the sustainability of the housing market could be stoked by a report from Urbanation Inc., which monitors the Toronto condominium market. The group says more than 50% of condominiums purchased in the last year were by buyers who do not intend to occupy their units and plan to rent in many instances.

Condominium rents in Toronto in the first quarter of 2011 were $2.11 per square foot compared to $2.09 a year earlier, a 0.8% increase. Condominiums being registered now and ready to be occupied are priced for sale at $450 per square foot range while newer units are going for $550 per square foot.

“What happens when these newer units hit the market?” said Ben Myers, executive vice-president of Urbanation. “At $550 per square foot a 750 square feet [condominium] is $413,000. You put 25% down and you have a mortgage of $310,000. Take a five-year variable rate mortgage at 3% with 25-year amortization and you get $1,475 a month mortgage. Your condo fee is $345, property tax is another $345 and you are up to $2,200 in carrying costs. That’s a huge [operating] loss [given the average rental rate would bring in just under $1,600/month]. People are buying these for capital appreciation.”

Ir was another good day for the Canadian preferred share market, with PerpetualDiscounts up 16bp, FixedResets winning 5bp and DeemedRetractibles gaining 7bp. Volatility was muted. Volume was relatively low.

The Committee to Protect Canadians from Competition has come up with a new bid for the TMX:

A group of nine Canadian banks and pension funds have offered to buy the TMX Group Inc., attempting to break up a planned merger between TMX and London Stock Exchange Plc with a richer offer that values the owner of the Toronto Stock Exchange at $3.6-billion.

The bid for all of TMX, which includes all but two of Canada’s six biggest banks, is worth $48 a share, sources said. That’s a 15-per-cent premium to TMX’s market price, sources said.
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The bid from the banks and pension funds will be made by a new company called Maple Group Acquisition Corp. In addition to cash, the banks and funds would merge their stakes in the country’s stock clearing system, CDS Inc., and a rival trading system, Alpha Group, with TMX as part of Maple.

Investors in TMX would get cash as well as new shares in Maple. The result would have the banks owning 25 per cent of the company, the pension funds 35 per cent and existing TMX shareholders the remaining 40 per cent, said a source familiar with the situation.

Lucky or Smart? A lot of guys achieve a measure of success and decide they’re not just smart, they’re invincible. And now another career’s been blown up:

Dominique Strauss-Kahn, head of the International Monetary Fund and a potential candidate for the French presidency, was charged with attempted rape and a criminal sex act on a New York hotel maid, police said.

The attack allegedly occurred yesterday against a 32- year-old female at a Sofitel hotel in midtown Manhattan, according to an e-mailed statement by the New York Police Department.
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The alleged victim is a maid at the hotel, New York Police Deputy Commissioner Paul Browne said. The assault occurred about 1 p.m. yesterday when the woman entered the $3,000-a-night suite — Room 2806 — Strauss-Kahn had checked into on May 13, Browne said in a telephone interview. Strauss-Kahn is alleged to have emerged from a bathroom naked and made two attempts to forcibly have sex with the maid, Browne said.

She managed to escape from the room and notified colleagues who called the police, Browne said. When officers arrived, Strauss-Kahn wasn’t there and his mobile phone had been left behind, he said.

Strauss-Kahn was in the first-class section of an Air France flight when it was minutes from departing.

Very hard to prove an unconsummated rape attempt. I’m more interested in what you get for three grand a night in a New York hotel. He’s being held without bail, which is a poke in the eye of France, not to mention him personally:

“He has almost no incentive to stay in this country,” Assistant District Attorney Artie McConnell told Jackson at the hearing in a packed courtroom in lower Manhattan. “He has an extensive network of contacts throughout the world.” France “does not extradite its nationals,” he said.

The judge agreed to hold Strauss-Kahn without bail, agreeing he is a flight risk.

The theatre has started already, with some people shouting it could be a set-up and others claiming that it’s old news.

The yuan took another baby-step towards becoming a global currency:

RBC Capital Markets, the corporate and investment banking arm of Royal Bank of Canada (RY on TSX and NYSE), has announced the launch of its deliverable offshore Chinese Yuan (CNH) platform.

Commenting on the launch Ed Monaghan, Global Head of FX, RBC Capital Markets, said: “The ascent of China to the second largest economy in the world means its currency has grown in importance and is even more relevant to our global client base. We see significant future prospects in the CNH market and will be developing this business over the coming months.”

The new platform, which will originate from RBC’s operations in Hong Kong, will enable RBC Capital Markets to execute interbank trades in CNH with its clients and counterparties, offering FX Spot, Forwards and Swaps. This new offering builds on RBC’s existing CNY Non-Deliverable Funds product.

Hat tip to Assiduous Reader BG for bringing this to my attention!

This is interesting:

Higher education fails to provide students “good value” for the money they and their families spend, more than half of U.S. adults said in a survey.

The debate over higher education’s value “has been triggered not just by rising costs but also by hard economic times,” according to a report released yesterday by the Washington-based Pew Research Center. The organization, an independent research group funded by Philadelphia-based Pew Charitable Trusts, surveyed 2,142 adults, aged 18 and older, from March 15 through March 29.

There’s a new name in the bond markets:

Google Inc. (GOOG) made its first foray into the bond market with a $3 billion sale to pay back short-term borrowings at relative yields comparable to companies with the highest credit grade.
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Google, with total cash and marketable securities of $35 billion at yearend, according a regulatory filing, is tapping the corporate bond market as investment-grade borrowing costs tumble to about the lowest since November. Chief Executive Officer Larry Page, who replaced Eric Schmidt last month, is ramping up spending to expand in mobile and video advertising even as U.S. and European authorities mount investigations into the company’s business practices.

The world’s biggest Internet-search company split the sale evenly between three-, five- and 10-year notes, according to data compiled by Bloomberg. The 1.25 percent, three-year notes yield 33 basis points more than similar-maturity Treasuries, the 2.125 percent, five-year debt pays a 43 basis-point spread, and the 3.625 percent, 10-year securities offer 58 basis points above benchmarks, Bloomberg data show.

The Bank of Canada has released a working paper by Jason Allen and Teodora Paligorova titled Bank Loans for Private and Public Firms in a Credit Crunch:

Banks reliance on short-term funding has increased over time. While an effective source of financing in good times, the 2007 financial crisis has exposed the vulnerability of banks and ultimately firms to such a liability structure. The authors show that banks that relied most on wholesale funding were the ones to contract its lending the most during the crisis. Their results suggest that banks propagate liquidity shocks by reducing credit only to a certain type of borrower. Importantly, in the financial crisis banks passed the liquidity shock only to public firms. Furthermore, long-term relationships between firms and banks played an important role during the crisis. Public firms with weak banking relationships pre-crisis experienced a greater credit crunch than other public borrowers.

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts gaining 6bp, FixedResets down 3bp and DeemedRetractibles up 9bp. Volatility picked up a little, but not to any special extent. Volume was desultory.