June 21, 2011

More Sino-Forest news:

Mr. Paulson and his firm, Paulson & Co., best known for prescient calls on the global financial crisis and the price of gold, controlled 14 per cent of Sino-Forest’s stock or about 34.7 million shares until recently. Paulson & Co. sold all of those shares by last Friday, according to a filing late yesterday with Canadian securities regulators.

“Due to the uncertainty over Sino-Forest’s public disclosures and financial statements, we have sold our stock and await the results of the independent committee’s investigation,” the firm said in a statement released through a public relations agency.

Fitch downgraded Sino-Forest:

The “complexities” of Sino-Forest’s corporate structure prompted Fitch Ratings to downgrade its long-term foreign- currency issuer default rating and senior unsecured debt rating to BB- from BB+, Fitch said yesterday in a statement. Ratings may be cut further if the “issues” aren’t resolved, it said.

Sino-Forest shares fell C$1.19, or 44 percent, to C$1.54 at 11:08 a.m. in Toronto trading.

Paulson, the biggest shareholder in Hong Kong-based Sino- Forest until the selloff, probably reduced losses by paring the stake before the Muddy Waters report. The hedge fund told clients in a June 3 letter that its total investment in Sino- Forest represented about 2 percent of the Advantage and Advantage Plus funds as of June 2. The funds have $18 billion in assets, a person with knowledge of the firm said at the time. The letter suggests the firm had cut its stake by about 30 percent by June 2, when Sino-Forest shares lost 64 percent.

The intellectual bankruptcy of the market was illustrated in the fact that a transparent hoax affected the market:

Shares of forestry company Sino-Forest Corp. tumbled another 17 per cent in early trading Tuesday as one of its largest stakeholders reportedly sold its holdings in the company and social media sites were aflutter with an apparent SEC news release hoax.

The company’s stock was down 48 cents to $2.25 in morning trading on the Toronto Stock Exchange.

The shift came as a representative for the U.S. Securities and Exchange Commission denied issuing a news release accusing research and investment firm Muddy Waters of being involved in a “stock manipulation ring.”

“We have issued no such litigation release,” said SEC spokeswoman Judith Burns in a phone interview with The Canadian Press.

Whenever I read anything of interest published by anybody regarding a SEC release, I check it. Not usually so much to check its existence, but to check the actual words used and their context. http://www.sec.gov. What’s hard about that? Anybody who took market action influenced by this rumour deserves to go bankrupt immediately – monetarily, that is, in addition to their pre-existing intellectual bankruptcy. (More here. Say what you like about the SEC, I can’t remember ever faulting them on grammar. Carson Block and his associates approaches several large hedge funds, indeed!)

The SEC has achieved another milestone in its programme of regulatory extortion, nailing JPMorgan for acting as a broker. However, they did helpfully publish a list of buy-side firms that may now be suspected of incompetence:

  • Thrivent Financial for Lutherans, a faith-based non-profit membership organization in Minneapolis.
  • Security Benefit Corporation, a Topeka, Kan.-based company that provides insurance and retirement products.
  • General Motors Asset Management, a New York-based asset manager for General Motors pension plans.
  • Financial institutions in East Asia including Tokyo Star Bank, Far Glory Life Insurance Company Ltd., Taiwan Life Insurance Company Ltd., and East Asia Asset Management Ltd

Investors considering placing funds with these firms are urged to exercise caution, gain a complete view of historical performance and demand to learn the rationale for the investment.

On a more uplifting note, Fabulous Fab is gaining some popular support:

Those hoping for a measure of justice for the Wall Street executives who brought us the financial crisis won’t be finding it anytime soon in the downtown Manhattan federal courtroom of Judge Barbara S. Jones.

What you’ll find there instead is the continuation of the Securities and Exchange Commission’s ridiculous civil lawsuit against Fabrice Tourre, the Goldman Sachs Group Inc. (GS) executive director who, at 28, shepherded to market in April 2007 Goldman’s infamous Abacus 2007-AC1 synthetic collateralized debt obligation. The deal was done at the behest of hedge fund manager John Paulson (who made a bundle) and a pair of foolish European banks (who lost one).

Jones should have thrown out the case against “Fabulous Fab” when she had the chance last week, because it is beyond absurd to single out for punishment one member of the Goldman team for putting together a deal for several highly sophisticated investors on the grounds that they weren’t sufficiently informed that some of them would make money while others would lose money. In every trade, there is a winner and a loser. That is the very nature of a market.

Is real-estate becoming a portable asset?

In the Miami area, Brazilians bought 9 percent of homes and apartments sold to international buyers in the 12 months through March 2010, behind only Canadians and Venezuelans, according to the Miami Association of Realtors. Since then, “anecdotal evidence certainly points to a significant increase,” said Lynda Fernandez, a spokeswoman for the group. In May, international clients bought about 60 percent of existing houses and condos and 90 percent of newly built homes, the association reported today.

The Bank of Canada has released a supplement to its latest Review, titled Paying with Polymer, about the new plastic bills.

PrefBlog has strenuously opposed the Maple bid for the TMX on general grounds. Rowland Fleming has specifics:

As the TSE CEO during the Bre-X crisis, I look with horror at the prospect that less than two decades later, successors at some of the same firms whose own conflicts helped to push the old Toronto Stock Exchange so close to the edge are proposing a return to those same bad old days. During my time, approximately 16 member-firm committees dictated on most operating and policy decisions. To be fair, most committee activities and decisions were quite appropriate, but the processes to placate and find consensus-driven decisions on the matters at hand were cumbersome, time consuming and certainly not sensitive to domestic or global competition from other exchanges and alternative trading systems.

I see The Maple Group, the elite consortium that includes TD Bank, CIBC, Scotiabank, National Bank, CPPIB and the Caisse de Dépôt, among others, as little more than a modern version of the old boys’ club that controlled the TSE before demutualization.

Julie Dickson of OSFI gave a speech titled A Canadian Perspective on the Global Insurance Industry. Nothing of import was said, but she did mention longevity insurance, a topic I find fascinating.

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts winning 18bp, FixedResets down 8bp and DeemedRetractibles gaining 7bp. Volatility was muted. Volume was good.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.0350 % 2,469.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.0350 % 3,714.1
Floater 2.45 % 2.22 % 39,756 21.74 4 -0.0350 % 2,666.4
OpRet 4.86 % 2.72 % 65,702 0.35 9 0.3139 % 2,438.5
SplitShare 5.25 % -0.47 % 61,981 0.48 6 0.0465 % 2,502.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3139 % 2,229.7
Perpetual-Premium 5.66 % 5.25 % 141,960 1.37 12 -0.0558 % 2,076.1
Perpetual-Discount 5.48 % 5.53 % 122,362 14.56 18 0.1849 % 2,178.9
FixedReset 5.17 % 3.35 % 197,726 2.80 57 -0.0776 % 2,307.4
Deemed-Retractible 5.08 % 4.89 % 288,974 8.18 47 0.0698 % 2,150.8
Performance Highlights
Issue Index Change Notes
GWO.PR.J FixedReset -3.54 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.57 %
GWO.PR.G Deemed-Retractible -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.25
Bid-YTW : 5.60 %
Maturity Type : Call
Maturity Date : 2013-07-01
Maturity Price : 25.75
Evaluated at bid price : 26.85
Bid-YTW : 2.72 %
NEW.PR.C SplitShare 1.67 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-07-26
Maturity Price : 13.70
Evaluated at bid price : 14.11
Bid-YTW : -23.92 %
Volume Highlights
Issue Index Shares
CIU.PR.B FixedReset 144,700 Nesbitt crossed blocks of 48,700 and 59,100, both at 27.90.
Maturity Type : Call
Maturity Date : 2014-07-01
Maturity Price : 25.00
Evaluated at bid price : 27.70
Bid-YTW : 3.10 %
BNS.PR.P FixedReset 97,548 Nesbitt crossed 59,600 at 26.14.
Maturity Type : Call
Maturity Date : 2013-05-25
Maturity Price : 25.00
Evaluated at bid price : 26.04
Bid-YTW : 3.06 %
BMO.PR.M FixedReset 88,956 RBC crossed 19,700 at 26.24; Nesbitt crossed 50,000 at 26.25.
Maturity Type : Call
Maturity Date : 2013-09-24
Maturity Price : 25.00
Evaluated at bid price : 26.18
Bid-YTW : 2.87 %
HSB.PR.E FixedReset 86,290 RBC crossed 79,100 at 27.45.
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 27.45
Bid-YTW : 3.26 %
TD.PR.Q Deemed-Retractible 56,101 RBC crossed 28,000 at 26.08.
Maturity Type : Call
Maturity Date : 2017-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.19
Bid-YTW : 4.83 %
BMO.PR.O FixedReset 51,094 Nesbitt crossed 24,000 at 27.74; RBC crossed two blocks of 10,000 each at the same price.
Maturity Type : Call
Maturity Date : 2014-06-24
Maturity Price : 25.00
Evaluated at bid price : 27.66
Bid-YTW : 2.98 %
There were 42 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.J FixedReset Quote: 25.85 – 26.95
Spot Rate : 1.1000
Average : 0.8735

Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.57 %

PWF.PR.M FixedReset Quote: 26.70 – 27.25
Spot Rate : 0.5500
Average : 0.3519

Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 3.68 %

PWF.PR.A Floater Quote: 23.55 – 23.93
Spot Rate : 0.3800
Average : 0.2267

Maturity Type : Limit Maturity
Maturity Date : 2041-06-21
Maturity Price : 23.25
Evaluated at bid price : 23.55
Bid-YTW : 2.21 %

ELF.PR.F Perpetual-Discount Quote: 22.46 – 23.09
Spot Rate : 0.6300
Average : 0.4911

Maturity Type : Limit Maturity
Maturity Date : 2041-06-21
Maturity Price : 22.15
Evaluated at bid price : 22.46
Bid-YTW : 6.00 %

POW.PR.D Perpetual-Discount Quote: 23.45 – 23.78
Spot Rate : 0.3300
Average : 0.2326

Maturity Type : Limit Maturity
Maturity Date : 2041-06-21
Maturity Price : 23.20
Evaluated at bid price : 23.45
Bid-YTW : 5.33 %

BAM.PR.J OpRet Quote: 27.06 – 27.49
Spot Rate : 0.4300
Average : 0.3364

Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 26.00
Evaluated at bid price : 27.06
Bid-YTW : 3.66 %

One Response to “June 21, 2011”

  1. […] mentioned my fascination with longevity risk for pension plans on June 21. Swiss Re also considers it a fascinating topic: A number of Canadian pension plans are not putting […]

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