PrefBlog

TXPR closed at 548.39, down 0.56% on the day. Volume today was 1.72-million, fourth-highest of the past 21 trading days.

CPD closed at 10.94, down 0.36% on the day. Volume was 63,550, well below the median of the past 21 trading days.

ZPR closed at 9.22, unchanged on the day. Volume was 275,640, highest of the median of the past 21 trading days.

Five-year Canada yields were down to 3.63% today.

And bitcoin got absolutely hammered today, which may be related to troubles at FTX:

The near-collapse of FTX, a dominant cryptocurrency exchange once seen as a trustworthy oasis in a sketchy industry, is ricocheting through the crypto sector at alarming speed, sending the prices of multiple cryptocurrencies plummeting and raising serious doubts about the business model for all crypto assets.

The potential for contagion is only growing following the news late Wednesday that Binance, a rival exchange, is walking away from its potential takeover of FTX, citing concerns about FTX’s finances and a new regulatory probe of the exchange.

I’ve thought for a long time that being a small-time landlord is one of the worst jobs in the world. Many disagree:

New data published by Statistics Canada suggests that while the share of Canadians reporting rental income has grown modestly since 2000, thanks to the growing population the net number of small landlords is up about 32 per cent just since 2008.

In a report published online, Statistics Canada says it obtained data from tax filings that showed 1,356,650 households reported income from rentals.
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In total about 7.9 per cent of Canadian households reported a median rental income of $2,750 (up from 2000 when 7.4 per cent reported a median rental income of $790).

Statcan’s data shows landlord life has also gotten more lucrative: In 2000, 65 per cent of landlord households reported their rental income was net positive (in other words, profitable), by 2020 with vastly more landlords to compete against 76.3 per cent reported profitable rental income. (The low point in that stretch came during the 2008 financial crisis when only 63 per cent reported profits.)

There’s also a significant wealth gap between those with rental income and those without: Artisinal landlords had a median annual income of $113,030, nearly double that of the 15,751,670 families with no rental income ($63,040).

I’m actually impressed that so many are cash-flow-positive; but I’ll bet that changes a bit when the mortgages get renewed!

Unfazed by the Republicans’ lack of wholesale success in the US mid-terms, the Junior Republicans are practicing their use of the victim card:

Unlike other party leaders, Mr. Poilievre does not routinely take questions from journalists, who are members of the press gallery, on Parliament Hill. The Parliamentary Press Gallery consists of 302 members from 48 agencies and outlets, including national and international organizations, not counting freelance journalists.

“It’s not just the Parliamentary Press Gallery that controls the agenda, and I think that’s what’s going on here. The Parliamentary Press Gallery believes it should dominate political discourse. I believe we have a big country, with people who are not necessarily part of the press gallery,” Mr. Poilievre told journalists.

Hey, it’s easier than answering questions!

PerpetualDiscounts now yield 6.82%, equivalent to 8.87% interest at the standard equivalency factor of 1.3x. Long corporates continue to yield 5.49%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has gaped wider to 340bp from the 305bp reported November 2. However, I suspect that the “Weighted Average Yield to Maturity” reported by BMO on their ZLC page is not kept current; anything to withhold information from the masses is good business for the banks! I’ve sent an inquiry; we’ll just see what kind of answer I get!

Jobs, jobs, jobs!:

The Canadian economy showed resilience in October as it created a robust number of jobs, more than recouping the positions lost during a summer lull.

Employment jumped by 108,000 in October, far more than the 10,000 that financial analysts expected, Statistics Canada said on Friday. Combined with a modest gain in September, the recent uptick has taken total employment to an all-time high. The unemployment rate held steady at 5.2 per cent as more people participated in the labour market.
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Analysts were encouraged by the details of the Canadian report: Job creation was entirely in full-time positions and mostly in the private sector. Total hours worked rose 0.7 per cent, an early sign economic growth will remain positive in the fourth quarter.

Compensation, meanwhile, picked up again. Average hourly wages grew 5.6 per cent over the past year, up from 5.2 per cent in September, marking a fifth consecutive month above 5 per cent.
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Traders are pricing in a 65-per-cent chance the Bank of Canada hikes its key rate by 50 basis points on Dec. 7. (A basis point is 1/100th of a percentage point.) Prior to the jobs report, those odds were about 50 per cent.

… and in the States:

Job growth remained stubbornly robust in October despite higher interest rates, defying policymakers’ efforts to dampen the labor market and curb the fastest inflation in generations.

Employers added 261,000 jobs last month on a seasonally adjusted basis, the Labor Department said Friday. That was down from 315,000 in September. The unemployment rate rose to 3.7 percent.
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Average hourly earnings climbed by 4.7 percent in the year through October. While that is a slight slowdown from 5 percent in the year through September, it remains a very rapid pace. Between September and October, wages climbed by 0.4 percent, more than the increase the month before and the fastest pace of monthly increase since July.

TXPR closed at 555.07, down 0.63% on the day. Volume today was 1.28-million, near the median of the past 21 trading days.

CPD closed at 11.03, down 0.72% on the day. Volume was 70,360, below the median of the past 21 trading days.

ZPR closed at 9.22, down 0.86% on the day. Volume was 224,300, above the median of the past 21 trading days.

Five-year Canada yields were up to 3.62% today.

Even more spending from the Feds today:

Finance Minister Chrystia Freeland delivered a fall economic update Thursday that warns of a potential recession next year, and includes plans for a tax on share buybacks, significant incentives for green energy investment, and spending on students and low-income workers.

All Canada student and apprentice loans would be interest free, at a cost of $2.7-billion over five years, and another $4-billion over six years would be automatically issued in advance payments of the Canada Workers Benefit to people who had qualified the previous year.
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The new measures specifically related to boosting business investment are worth $10.9-billion over six years. They include $250-million over five years for a package of new job training programs. There is also a new Investment Tax Credit for Clean Technologies that will offer a refundable tax credit equal to 30 per cent of the capital cost of investments in energy projects such as solar, wind and small nuclear reactors. The Finance Department is planning consultations to include labour conditions in order to access the full credit.
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The proposed tax on share buybacks had not previously been signalled and is sure to generate significant policy debate, as it has south of the border.

The share buyback and energy incentives are aimed at responding to a major package of tax and climate policy reforms approved this year through the U.S. Inflation Reduction Act.

The U.S. act includes a 1-per-cent excise tax on stock buybacks, which refers to situations when companies use excess cash to purchase their own shares. U.S. Democrats said the tax will raise billions in new revenue while also encouraging companies to put excess cash toward investment and wages. The economic impact of the tax and buybacks in general is a matter of considerable policy debate.

Ms. Freeland’s update proposes a 2-per-cent tax that would apply on the net value of all types of share buybacks by public corporations in Canada. The government says details of the new tax will be announced in the 2023 budget and would come into force on Jan. 1, 2024.
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Robert Asselin, senior vice-president of policy for the Business Council of Canada, said he was skeptical about Ms. Freeland’s vow of fiscal prudence.

“They are spending about 45 per cent of the revenue windfall they are getting for a very inflationary economy. For me, that is not fiscal prudence,” Mr. Asselin said in an interview, adding all of their windfall should have been directed at deficit reduction.

The student loan interest relief is modest:

Finance Minister Chrystia Freeland has announced plans to erase the interest on federal student and apprentice loans as part of the government’s fall fiscal update.

The move, made amid soaring living costs and the threat of a looming recession, would bring relief to many budget-strapped young Canadians who’ve been borrowing to finance their education. The measure, if implemented, would kick in on April 1, the day after a temporary freeze on the accrual of interest on federal student loans is set to expire.

It would make the loans interest free at that point and apply to those currently being repaid as well.
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Half of all postsecondary students in Canada rely on student loans to help them pay for school, the federal government said in its fall update, released on Thursday. Eliminating the interest on the federal portion of government loans would save the average borrower $410 a year, it added.

The proposed change would cost taxpayers $2.7-billion over five years and $556.3-million a year thereafter, the government estimated.

The share buyback tax is more controversial:

Ottawa plans to introduce a 2-per-cent tax on share buybacks, in an effort to have corporations increase spending on workers – and potentially reap some of the financial windfall being enjoyed by the oil and gas sector.

The federal Liberals said Thursday that the change would also encourage companies to reinvest their profits in workers and in Canada more broadly. The new tax reflects a similar move in the United States, which imposed a 1-per-cent tax on stock buybacks in August as part of the Biden administration’s Inflation Reduction Act.

While details of the corporate tax will be announced in Budget 2023, it will apply to the net value of all types of share buybacks by public companies in Canada from Jan. 1, 2024, according to the government’s fall economic update. Ottawa estimates the measure will dump an extra $2.1-billion into federal coffers over a five-year period.
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The use of stock buybacks in corporate Canada has exploded over the past few years.

Five years ago, the members of the S&P/TSX 60 Index – some of Canada’s biggest companies – spent nearly twice as much cash paying dividends to shareholders as they did repurchasing their shares. Now, stock buybacks outpace dividend payments.

The TSX 60 companies spent $67.1-billion in the past 12 months repurchasing their common shares, according to S&P Global Market Intelligence. That compares to $26.1-billion five years ago.

In contrast, dividend payments to shareholders have not grown nearly as much. The TSX 60 companies paid $59.4-billion in dividends in the past 12 months, according to S&P Global Market Intelligence. That compares to $45.8-billion five years ago.