Looks like the market rally is over:
Individual investors rushed into stocks and bonds in January, setting the stage for the biggest month on record for deposits into U.S. mutual funds.
Long-term funds, which exclude money-market vehicles, attracted $64.8 billion in the first three weeks of the month, according to the Washington-based Investment Company Institute. The previous record was $52.6 billion for all of May 2009, according to the ICI, whose data goes back to 1984.
Signs of improvement in the U.S. economy and a rising stock market that pushed the Dow Jones Industrial Average above 14,000 today for the first time since 2007 have prompted Americans to step up their investments. Equity mutual funds gathered $29.9 billion in January’s first three weeks, more than for any full month since 2006.
There’s some talk in the US of an exchange dedicated to the exempt market and restricted to accredited investors:
A panel that advises the Securities and Exchange Commission on Friday recommended an exclusive exchange be created for micro- and small-capitalization public companies that would only be available for only high-net-worth investors.
The panel, the advisory committee on small and emerging companies, voted to urge the SEC to support the setting up of an exchange for small publicly traded companies that would only be accessible for high-income individuals such as so-called accredited investors, who must have net worths, excluding their homes, of $1 million or more or income of $200,000 or more for at least two years.
Companies listing on an exchange set up for high-net-worth investors may not be required to provide costly prospectuses and other disclosures that are necessary when retail investors are involved. Backers contend that this would drive down costs associated with public offerings and could encourage private companies to take the plunge into becoming almost-public companies. However, retail investor advocates worry that small investors would be blocked from making desired investments.
This is in addition to other speculative ideas like large ticks for small caps:
Twelve years after the U.S. switched to 1-cent increments for stock trading to save investors money, regulators and broker-dealers are considering a test of larger tick sizes.
A pilot study of bigger quoting increments to improve liquidity in less-active stocks will be debated by executives from exchanges and brokers, market makers and academics at a Securities and Exchange Commission meeting tomorrow, according to an agenda posted online. The U.S. moved to minimum ticks of a penny from sixteenths of $1 in 2001. Panelists will also discuss the effect of 1-cent price moves on capital raising and trading.
Proponents say larger increments will spur market makers to supply more buying and selling volume, particularly for less- active stocks, while skeptics say it will cause people to pay more when they trade.
Other, less dramatic, ideas were reported by the SEC:
- Rationalize the disclosure framework for small cap companies by raising the market capitalization threshold for small reporting companies (SRCs) and extending to SRCs the benefits granted to emerging growth companies under the JOBS Act.
- Further ease the compliance burden on SRCs by exempting SRCs from other requirements that result in significant costs for SRCs without generating information necessary to making an informed investment decision
Amidst these encouraging signs for less-fettered capital markets comes a lawsuit against S&P:
Standard & Poor’s on Monday said it expects to be the target of a U.S. Department of Justice civil lawsuit over its ratings of mortgage bonds before the recent financial crisis.
The lawsuit against the McGraw-Hill Cos. unit focuses on its ratings in 2007 of various U.S. collateralized debt obligations (CDO), S&P said.
…
In its statement, S&P said it “deeply regrets” how its CDO ratings failed to anticipate the fast-deteriorating mortgage market conditions, and that it has since spent $400-million to help bolster the quality of its ratings.
And instead of raising capital as they’re supposed to naughty bankers are dumping assets:
The big banks can’t get rid of their riskiest assets fast enough.
Deutsche Bank is selling €16-billion ($21.6-billion) of risk-weighted assets stuffed in a credit portfolio, according to International Financing Review.
The sale is part of a €100-billion endeavour by the German bank to unload some of its riskiest assets and get capital levels up to snuff. Under Basel III, global banks must have tangible common equity that amounts to at least 7 per cent of their risk-weighted assets, and Deutsche was one of the worst capitalized banks at the height of the financial crisis.
And the European financial transaction tax is having the expected effect:
Half a century after a U.S. tax on bond purchases spawned the $3.7 trillion-a-year Eurobond market, Europe’s plan to impose a levy on financial transactions risks triggering a similar flight.
Against the objections of nations including the U.K. and Luxembourg, European Union finance ministers agreed Jan. 22 that interested member states may design a broad-based tax that would cover trades in stocks, bonds, derivatives and other securities. The EU estimates the proposal would allow France, Germany and nine other countries to raise as much as $47 billion a year.
…
The Eurobond market, now the largest forum for corporate fixed-income transactions, came into being after President John F. Kennedy imposed a so-called interest-equalization tax in 1963 to make investing in foreign securities less alluring to U.S. investors and ease a balance of payments deficit.Italy’s Autostrade per l’Italia SpA issued the first Eurobond in July 1963, a $15 million issue managed by S.G. Warburg, according to “The Eurobond Diaries,” a market history published in 1994. The U.S. move drove bond trading to London, where an unregulated market arose. So-called Belgian dentists, shorthand for wealthy entrepreneurs whose customers paid in cash, bought corporate debt and rode the “coupon train” to Luxembourg to collect interest, according to Mint Partners Ltd. bond broker Bill Blain, who joined Morgan Stanley in 1985.
“It was all driven by tax,” he said. “Who would have thought Europe would be so stupid as to actually do this now?”
It was a mixed day for the Canadian preferred share market, with PerpetualPremiums up 8bp, FixedResets down 7bp and DeemedRetractibles gaining 2bp. Volatility was low. Volume was high.
| 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 | 0.3971 % | 2,560.4 |
| FixedFloater | 4.20 % | 3.52 % | 27,521 | 18.30 | 1 | 0.0000 % | 3,874.1 |
| Floater | 2.60 % | 2.92 % | 67,268 | 19.91 | 5 | 0.3971 % | 2,764.5 |
| OpRet | 4.76 % | 2.16 % | 33,567 | 0.39 | 5 | -0.1608 % | 2,598.1 |
| SplitShare | 4.57 % | 4.41 % | 41,072 | 4.27 | 2 | 0.0000 % | 2,914.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1608 % | 2,375.8 |
| Perpetual-Premium | 5.24 % | -1.45 % | 89,367 | 0.09 | 29 | 0.0840 % | 2,351.6 |
| Perpetual-Discount | 4.86 % | 4.91 % | 144,312 | 15.60 | 4 | -0.0610 % | 2,642.3 |
| FixedReset | 4.91 % | 2.96 % | 265,386 | 3.38 | 78 | -0.0677 % | 2,486.4 |
| Deemed-Retractible | 4.88 % | 3.14 % | 139,699 | 0.30 | 45 | 0.0250 % | 2,431.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.K | Perpetual-Premium | 1.43 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-31 Maturity Price : 25.25 Evaluated at bid price : 25.50 Bid-YTW : 3.64 % |
| TRI.PR.B | Floater | 1.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-04 Maturity Price : 23.14 Evaluated at bid price : 23.40 Bid-YTW : 2.23 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| FTS.PR.C | OpRet | 291,159 | Desjardins crossed 284,200 at 25.47. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2013-08-31 Maturity Price : 25.00 Evaluated at bid price : 25.48 Bid-YTW : 3.79 % |
| IFC.PR.A | FixedReset | 134,772 | Desjardins crossed 65,000 at 26.10. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.07 Bid-YTW : 3.26 % |
| FTS.PR.F | Perpetual-Premium | 108,190 | Desjardins crossed 99,100 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-03-06 Maturity Price : 25.75 Evaluated at bid price : 26.04 Bid-YTW : 1.55 % |
| TRI.PR.B | Floater | 94,935 | RBC crossed blocks of 50,000 and 13,700, both at 23.55. TD crossed 30,000 at 23.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-04 Maturity Price : 23.14 Evaluated at bid price : 23.40 Bid-YTW : 2.23 % |
| MFC.PR.D | FixedReset | 73,599 | Nesbitt crossed 66,400 at 26.71. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.68 Bid-YTW : 2.26 % |
| HSE.PR.A | FixedReset | 73,194 | Desjardins crossed 63,600 at 26.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.52 Bid-YTW : 2.58 % |
| There were 42 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: 18.00 – 19.00 Spot Rate : 1.0000 Average : 0.8447 YTW SCENARIO |
| ENB.PR.D | FixedReset | Quote: 25.63 – 25.90 Spot Rate : 0.2700 Average : 0.1709 YTW SCENARIO |
| BAM.PR.Z | FixedReset | Quote: 26.63 – 26.86 Spot Rate : 0.2300 Average : 0.1427 YTW SCENARIO |
| RY.PR.L | FixedReset | Quote: 25.75 – 25.98 Spot Rate : 0.2300 Average : 0.1553 YTW SCENARIO |
| BNS.PR.L | Deemed-Retractible | Quote: 25.78 – 25.99 Spot Rate : 0.2100 Average : 0.1441 YTW SCENARIO |
| BAM.PF.B | FixedReset | Quote: 25.55 – 25.75 Spot Rate : 0.2000 Average : 0.1432 YTW SCENARIO |