We have more welfare payments to dinosaurs:
The federal government announced a five-year extension of its $250-million Automotive Innovation Fund Friday that was immediately deemed by some industry observers as the ongoing cost of Canada’s continued participating in the North American auto industry.
Why do we subsidize them? Because they’re good jobs. Why are they good jobs? Because they’re subsidized.
The Basel III liquidity rules have been modified:
Global central bank chiefs agreed to water down and delay a planned bank liquidity rule to counter warnings that the proposal would strangle lending and stifle the economic recovery.
Lenders will be allowed to use an expanded range of assets including some equities and securitized mortgage debt to meet the so-called liquidity coverage ratio, or LCR, following a deal struck by regulatory chiefs meeting today in Basel, Switzerland. Banks will also have an extra four years to fully comply with the measure.
…
A sample of 209 banks assessed by the Basel committee had a collective shortfall of 1.8 trillion euros ($2.3 trillion) at the end of 2011 in the assets needed to meet the 2010 version of the LCR, according to figures published by the Basel group.Banks had warned that the initial LCR proposal would force them to buy additional sovereign debt, more closely tying their fate to governments’ solvency. The 2010 rule was drafted before the EU was fully confronted by a sovereign debt crisis that challenged traditional assumptions about the credit worthiness of government bonds.
Forcing banks to buy government debt is a form of financial repression.
Bloomberg’s editors are upset about this:
Not for the first time, the panel has retreated from its initial demands, and the final liquidity rule is far less rigorous than the committee had said it wanted and financial markets had been expecting.
…
The committee issued its draft liquidity rules in 2010. The idea was to lay down the quantity and quality of liquid assets (in theory, assets that can be sold quickly without driving down prices) that banks must hold to cover a run on deposits or some other interruption in short-term funding. Under pressure from banks, especially those in the U.S., most aspects of the draft proposal have been weakened in the final document.For instance, the new rule says liquidity must be enough to cover a 30-day run on insured retail deposits of 3 percent, instead of 5 percent as proposed. It also expands the range of corporate debt securities that qualify as liquid to BBB- (the lower boundary of “investment grade”); previously, the committee said nothing less than AA- should be eligible. High-quality mortgage-backed securities will also count.
This broadening of qualifying assets means that almost all banks already satisfy the rule — a point that was acknowledged by Bank of England Governor Mervyn King, the chairman of the rule-setting committee.
…
As guttings go, this is pretty thorough. It confirms the committee’s reputation for delay, backsliding and willingness to accommodate the preferences of banks — the industry it’s supposed to be supervising. If the panel had been mindful of its credibility, it would have issued a draft it was willing to defend in the face of expected pressure from the industry.
William Cohan on Bloomberg has a nice piece on the realities of regulation:
Instead of taking a job at a big Wall Street investment bank, he [“Dock2” Treece] returned home to Toledo, Ohio, and joined, as a partner, his father’s tiny investment-advisory firm, Treece Investment Advisory Corp., and the family broker-dealer, Treece Financial Services Corp. The two companies have five employees: Dock2 Treece, his father, his younger brother and two administrators.
…
The Treeces’ 2010 Finra exam, however, went on for eight months, as the regulators kept asking for more and more documents to try to discover a minor technical point about what kind of mutual funds the firm sold to its customers.Treece said Finra kept telling him to sell a kind of mutual fund that he knew he wasn’t supposed to sell, but the examiners seemed to not understand the rules. To fulfill one Finra request required 4,000 pages of documents to be copied and sent off.
“It had taken my staff two weeks to get together, literally, just standing in front of a copy machine for 12 hours a day, pull a file out, take the documents out that they wanted, copy them, put them in a box, put the originals back in the file, and put the file back,” Treece said. “I mean, talk about useless.”
He said he spent more than $30,000 in legal fees — chicken feed on Wall Street but a big deal at a tiny firm — trying to convince the examiners of something they should have known about all along.
Here’s an idea for Toronto – Subway Savings Bonds!
Malaysia, Southeast Asia’s biggest local-currency bond market, will let retail investors fund Kuala Lumpur’s new subway when it starts marketing its first exchange- traded notes to individuals.
…
DanaInfra will offer 300 million ringgit ($99 million) of government-guaranteed Islamic securities to individuals, Ashraf Radzi, associate director of Prokhas Sdn., a financial adviser to the company, said in Jan. 3 interview. He declined to give specific details such as yields or maturity.The bonds, which pay returns on assets to comply with the Koran’s ban on interest, will be sold in increments of 100 ringgit, or the equivalent of $33, with a minimum order value of 1,000 ringgit, Bursa Malaysia’s Tajuddin said.
Rob Carrick of the Globe has weighed in on trailers:
What regulators should do is order the replacement of trailing commissions with a fee that is set by the adviser as a percentage of the client’s assets, to be withdrawn quarterly from cash holdings in the client’s account. The investment industry should introduce the phrase “advice fee” and create standards under which this fee would cover not only investment management, but financial planning.
He means, fees should be charged in the way an actual portfolio manager charges fees, forgetting that there’s one problem with this model: a huge segment of the investing public doesn’t want it. ‘There was no trading!’ says Joe Blow. ‘Why should I pay if there was no trading?’.
I also see that Mr. Carrick wants to force me to offer financial planning, despite the fact that I do not want to offer financial planning. It’s a ludicrous idea … any single person can be good at only so many things; I have chosen to be good at quantitative investment strategies, fixed income in general and preferred shares in particular. Now I’m going to be forced to offer financial planning? What’s next, I have to offer golf games and hockey tickets to big clients and hire a pretty receptionist?
Still another hurdle is you, the investor. You can be half to two-thirds excused for your fee ignorance because of the way you’ve been manipulated by the investing industry.
Totally wrong. There is full disclosure all over the place. Anybody who doesn’t know about fees hasn’t done any work at all. Is that another job Mr. Carrick wants to give me? Reading aloud the prospectus to prospective clients?
It was a mixed day for the Canadian preferred share market, with PerpetualPremiums up 8bp, FixedResets down 3bp and DeemedRetractibles off 2bp. Volatility was average. Volume recovered, to average levels.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2796 % | 2,494.7 |
| FixedFloater | 4.29 % | 3.65 % | 28,488 | 17.94 | 1 | -0.6278 % | 3,753.4 |
| Floater | 2.79 % | 3.00 % | 54,335 | 19.75 | 4 | 0.2796 % | 2,693.6 |
| OpRet | 4.62 % | -5.77 % | 49,672 | 0.40 | 4 | -0.0476 % | 2,601.0 |
| SplitShare | 4.63 % | 4.68 % | 47,851 | 4.34 | 2 | 0.0000 % | 2,879.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0476 % | 2,378.3 |
| Perpetual-Premium | 5.24 % | 0.14 % | 73,092 | 0.76 | 30 | 0.0826 % | 2,340.0 |
| Perpetual-Discount | 4.82 % | 4.82 % | 134,770 | 15.79 | 4 | 0.5382 % | 2,660.6 |
| FixedReset | 4.92 % | 2.91 % | 203,750 | 4.01 | 78 | -0.0252 % | 2,472.3 |
| Deemed-Retractible | 4.87 % | 0.44 % | 108,687 | 0.35 | 46 | -0.0218 % | 2,433.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| FTS.PR.H | FixedReset | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-07 Maturity Price : 23.63 Evaluated at bid price : 25.39 Bid-YTW : 2.90 % |
| IFC.PR.C | FixedReset | -1.13 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 26.31 Bid-YTW : 2.75 % |
| SLF.PR.G | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.81 Bid-YTW : 3.42 % |
| ELF.PR.G | Perpetual-Discount | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-07 Maturity Price : 24.07 Evaluated at bid price : 24.57 Bid-YTW : 4.82 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| HSB.PR.D | Deemed-Retractible | 67,500 | National crossed 47,200 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-06 Maturity Price : 25.50 Evaluated at bid price : 26.00 Bid-YTW : -16.86 % |
| BAM.PR.Z | FixedReset | 61,776 | Nesbitt crossed 50,000 at 26.41. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.41 Bid-YTW : 3.60 % |
| BAM.PR.P | FixedReset | 60,397 | Nesbitt crossed 50,000 at 27.13. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-30 Maturity Price : 25.00 Evaluated at bid price : 27.03 Bid-YTW : 2.29 % |
| ENB.PR.T | FixedReset | 40,890 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-07 Maturity Price : 23.22 Evaluated at bid price : 25.38 Bid-YTW : 3.80 % |
| CU.PR.D | Perpetual-Premium | 39,600 | RBC crossed 38,300 at 26.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 26.35 Bid-YTW : 4.24 % |
| GWO.PR.P | Deemed-Retractible | 36,980 | RBC crossed 30.700 at 26.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.51 Bid-YTW : 4.62 % |
| There were 31 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.C | Floater | Quote: 17.50 – 19.00 Spot Rate : 1.5000 Average : 1.1035 YTW SCENARIO |
| BMO.PR.H | Deemed-Retractible | Quote: 25.47 – 25.92 Spot Rate : 0.4500 Average : 0.2602 YTW SCENARIO |
| FTS.PR.H | FixedReset | Quote: 25.39 – 25.85 Spot Rate : 0.4600 Average : 0.2870 YTW SCENARIO |
| BMO.PR.M | FixedReset | Quote: 25.10 – 25.40 Spot Rate : 0.3000 Average : 0.1807 YTW SCENARIO |
| MFC.PR.D | FixedReset | Quote: 26.50 – 26.79 Spot Rate : 0.2900 Average : 0.1784 YTW SCENARIO |
| MFC.PR.G | FixedReset | Quote: 26.15 – 26.41 Spot Rate : 0.2600 Average : 0.1529 YTW SCENARIO |