Hugh Anderson has a column in today’s Financial Post, Clear Thinking for Smart Investing :
Above all, you need to understand clearly who has the upper hand in the never-ending tussle between issuer and buyer. The answer revolves around the ability of the issuer to terminate the investment at its option. Naturally, this almost always occurs at the best time for the issuer. That’s why James Hymas terms the yield to call the “yield to worst.”
Hymas owns Hymas Investment Management … one of the few easily available sources of comment and key data on the Canadian preferred market. He writes a monthly subscription newsletter, makes available detailed data on a selection of preferred issues at www.prefinfo.com and writes a blog (www.prefblog.com) about what’s going on in the preferred market.
Hymas’s writing is refreshingly candid, Buffett-style. He describes as “monumental bad timing” and “the greatest mistake of my professional life” his brief employment at Portus Alternative Asset Management three months before “the roof fell in.” Portus collapsed because of regulatory problems “over which he had no control”.
The website reported for Hymas Investment Management in the article is incorrect and I’ve removed it with ellipsis in the quotation. The correct website is www.himivest.com.
I should clarify that Yield-to-Worst is a technical, not a pejoritive, term. There is more than one yield to call … a perpetual has an infinite number of potential calls, although the difference between a call at $25 on November 27, 2185, and a call at $25 on November 28, 2185, might be considered negligible!
The Yield-to-Worst is the lowest yield that can result from the issuer exercising its privileges while honouring its responsibilities, and one of the choices is the possibility that the issue is not called at all. It is a much better predictor of performance than current yield, as further explained in my article A Call, too, Harms.
It’s nice to see my writing described as “refreshingly candid, Buffet-style” … but geez, there’s good old Portus being mentioned again. That, unfortunately, will be a millstone around my neck for the rest of my life – even though I have never even been accused of wrong-doing.
Congratulations! At least it is free advertising and somebody may find you through the prefblog or prefinfo reference rather than the mixed up himivest.