Assiduous Reader KL sends me a link to a critique titled The Paper World of Brookfield Asset Management. which highlights and illuminates many of the issues surrounding the earnings quality of the company. The piece has been published by something called the Southern Investigative Reporting Foundation, which as far as I can tell is Roddy Boyd’s version of self-employment.
Brookfield recently realized $250-million through the sale of some of its BEP.UN Units and is positioning itself for more secondary offerings with an initial spin-off of $900-million of BPY, which is Brookfield Property Partners. Brookfield has not announced any particular plans for spending the proceeds of the BEP.UN position.
Marc Tellier, son of Canadian business legend Paul Tellier, has parted ways with Yellow Media:
Who needs a phone book when you can Google a company’s phone number?
Some might argue there’s nothing Marc Tellier, Yellow Media’s former chief executive officer who left the company Thursday, could do about this. There’s some truth to that. The journalism industry, for one, has been disrupted by the Internet, too.
However, had Yellow Media been more debt-averse, it would have had time to re-tool its business strategy. Remember that when the company reworked its capital structure last year, its cash flows were still relatively strong – so strong that some shareholders argued the debtholders were forcing a restructuring simply to get a better stake in Yellow Media.
Yet the cash flows could only withstand so much debt, which started to become a major problem in early 2011.
I can’t say I’ll be rushing to invest in Paul Tellier’s son’s next venture. However, I continue to be amazed at how quickly YLO’s revenue dropped once the trouble became apparent.
It was the Federal Budget today … some items were:
The lifetime capital gains exemption is increased to $800,000 (from $750,000) on dispositions of qualified property (e.g., qualified small business corporation shares and qualified farm and qualified fishing property) by individuals effective for the 2014 taxation year. The new limit applies to all individuals, even those who previously used the capital gains exemption.
The amount is indexed for inflation for tax years after 2014.
…
The budget will phase out the federal tax credit for investments in labour-sponsored venture capital corporations (LSVCC).
…
The budget makes the cost to a taxpayer of renting a safety deposit box from a financial institution non-deductible for income tax purposes.
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The International Banking Centre rules exempt certain financial institutions from tax on certain income earned through a branch or office in Montreal and Vancouver.The budget proposes to repeal these rules. Eliminating the rules is partially in response to the international community having identified these rules as resembling preferential regimes in some tax havens.
…
A character conversion transaction generally involves a forward agreement to buy or sell a capital property at a specified future date. The purchase or sale price of the capital property under the forward agreement is not based on the performance of the capital property between the date of the agreement and the future date, but rather is often based on the performance of a portfolio of investments which would generally produce fully taxable ordinary income. If the derivative investment were made separately from the purchase or sale of the capital property (i.e., as a cash settled derivative financial instrument), any income from the derivative investment would be taxed as ordinary income.The budget proposes to treat the return as being distinct from the disposition of a capital property that is purchased or sold under the derivative forward agreement. This measure will apply to derivative forward agreements that have a duration of more than 180 days.
Any return arising under a derivative forward agreement that is not determined by reference to the performance of the capital property being purchased or sold will be treated as being on income account.
The income (or loss) will be included (or deductible) in computing income at the time of disposition if the capital property is subject to a derivative forward sale agreement and at the time of acquisition if the capital property is subject to a derivative forward purchase agreement.
I think that last one means the end of those silly Mutual Funds that invest in foreign or fixed income securities via a Total Return Swap to call themselves tax-advantaged. But, not having read the budget or the legislation, I’ll wait to see more third party commentary before making that interpretation firm.
Also of interest is The Securities Regulator That Would Not Die:
The Harper government is serving notice that it will impose a federal regulator on Canada’s securities markets if it can’t win sufficient backing from provinces for a jointly-run approach.
The ultimatum, delivered in the 2013 federal budget Thursday, comes after six years of efforts by Finance Minister Jim Flaherty to build support for a common securities regulator among mostly hesitant premiers.
And, wonder of wonders, Genius Boy is doing something useful about mortgage insurance:
In the federal budget tabled Thursday, Ottawa announced further steps to limit taxpayers’ exposure to the mortgage market by cracking down on banks’ ability to use bulk mortgage insurance as a tool to offset their risks and boost their bottom lines.
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Banks started buying more bulk insurance during the financial crisis because it makes it easier for them to package their mortgages into securities, which ultimately helps them to lend more. But they’ve also been upping their purchases because by insuring mortgages they can reduce the amount of capital they’re required to hold.Ottawa has been concerned about the growth of mortgage insurance for some time. Last year it capped the total amount of mortgage insurance that CMHC can have in force at $600-billion. As a result, CMHC, which was already creeping up toward that level, began rationing its sale of bulk insurance while maintaining sales levels of standard mortgage insurance (that on loans to borrowers with small down-payments).
I’m relieved to learn that access to bulk insurance is being rationed. After all, if it wasn’t rationed it would have to be auctioned, and this would reduce the power of bureaucrats and politicians to influence who gets to make what profits.
Cyprus might sell energy assets to Russia:
The government also submitted a draft law to create an “investment solidarity fund,” state-run CYBC television reported. The fund is intended to help raise the 5.8 billion euros needed to trigger emergency loans, Athens News Agency reported. Finance Minister Michael Sarris said in Moscow that while Russia won’t lend money to Cyprus, it’s looking at investment in the energy industry.
Russia is in talks over its possible role in the fund, the RIA Novosti news agency reported. President Vladimir Putin held talks in Moscow today with Jose Barroso, head of the European Commission, Putin’s spokesman Dmitry Peskov told reporters.
Earlier, Prime Minister Dmitry Medvedev said Cyprus’s financial turmoil may force Russia to review the share of euros in its international currency reserves, the world’s fourth- largest stockpile.
It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 3bp, FixedResets down 12bp and DeemedRetractibles ahead 2bp. Volatility was average, enlivened by a ridiculous quote on BAM.PR.C which illustrates the careful attention to detail so prevalent among professional Market Makers. Volume was average.
| 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 | -1.2880 % | 2,594.1 |
| FixedFloater | 4.09 % | 3.44 % | 28,703 | 18.39 | 1 | 0.0000 % | 3,971.7 |
| Floater | 2.58 % | 2.82 % | 86,824 | 20.18 | 5 | -1.2880 % | 2,800.9 |
| OpRet | 4.81 % | 2.18 % | 58,804 | 0.27 | 5 | 0.0774 % | 2,607.2 |
| SplitShare | 4.28 % | 4.08 % | 651,038 | 4.20 | 4 | 0.0220 % | 2,940.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0774 % | 2,384.1 |
| Perpetual-Premium | 5.20 % | 0.82 % | 88,184 | 0.11 | 31 | 0.0335 % | 2,366.1 |
| Perpetual-Discount | 4.77 % | 4.85 % | 164,439 | 15.78 | 5 | 0.0324 % | 2,664.6 |
| FixedReset | 4.90 % | 2.67 % | 288,835 | 3.30 | 80 | -0.1234 % | 2,509.5 |
| Deemed-Retractible | 4.86 % | 3.14 % | 138,905 | 0.67 | 44 | 0.0229 % | 2,448.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.C | Floater | -10.81 % | Not a real loss, as the trading range for the day was 18.52-54 on volume of 2.330 shares, a rather high proportion of it being odd-lots, which seems strange. This sort of nonsensical reporting is often the Exchange’s fault, since they won’t sell the Closing (4pm) market quotations, but only the Last (4:30pm) quotes – which are often influenced by cancellations during the extended trading session that are completely devoid of meaning.
In this case, however, it looks like the designated Market Maker (which I believe to be somebody working at W. D. Latimer) just fell asleep at the end of a long day: The quote at 15:59:50 was 18.53-55, 1×1 and the last quote prior to the close was 16.51-18.55, effective at 15:59:52. Nice job, chum. YTW SCENARIO |
| IFC.PR.A | FixedReset | -1.67 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.96 Bid-YTW : 3.15 % |
| IFC.PR.C | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 2.90 % |
| MFC.PR.J | FixedReset | -1.11 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.89 Bid-YTW : 3.24 % |
| PWF.PR.A | Floater | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-21 Maturity Price : 24.00 Evaluated at bid price : 24.25 Bid-YTW : 2.15 % |
| TRI.PR.B | Floater | 3.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-21 Maturity Price : 24.06 Evaluated at bid price : 24.32 Bid-YTW : 2.12 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.T | FixedReset | 95,600 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.39 Bid-YTW : 1.88 % |
| PWF.PR.S | Perpetual-Discount | 77,695 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-21 Maturity Price : 24.72 Evaluated at bid price : 25.12 Bid-YTW : 4.80 % |
| BNS.PR.X | FixedReset | 73,800 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.38 Bid-YTW : 1.91 % |
| ENB.PR.B | FixedReset | 69,923 | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.92 Bid-YTW : 3.13 % |
| CM.PR.M | FixedReset | 68,520 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.81 Bid-YTW : 1.79 % |
| ENB.PR.P | FixedReset | 64,640 | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.76 Bid-YTW : 3.49 % |
| 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: 16.50 – 18.55 Spot Rate : 2.0500 Average : 1.2370 YTW SCENARIO |
| PWF.PR.L | Perpetual-Premium | Quote: 25.62 – 25.97 Spot Rate : 0.3500 Average : 0.2410 YTW SCENARIO |
| CM.PR.D | Perpetual-Premium | Quote: 26.12 – 26.39 Spot Rate : 0.2700 Average : 0.1688 YTW SCENARIO |
| TD.PR.R | Deemed-Retractible | Quote: 26.72 – 26.99 Spot Rate : 0.2700 Average : 0.1688 YTW SCENARIO |
| MFC.PR.J | FixedReset | Quote: 25.89 – 26.18 Spot Rate : 0.2900 Average : 0.1963 YTW SCENARIO |
| CM.PR.K | FixedReset | Quote: 26.06 – 26.38 Spot Rate : 0.3200 Average : 0.2271 YTW SCENARIO |
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