The credit rating agencies won a round:
Moody’s Corp. (MCO) won dismissal of a lawsuit by a pension fund claiming the credit ratings firm made false statements about its independence and objectivity.
U.S. District Judge George B. Daniels in Manhattan found that the Teamsters Local 282 Pension Trust Fund failed to establish that Moody’s violated securities laws, according to a ruling issued today.
The pension fund, an investor in New York-based Moody’s, argued the company succumbed to conflicts of interest when it assigned faulty ratings to structured securities products before the financial crisis.
The fund alleged that Moody’s stock dropped after questions arose about the mortgage-backed securities and other products the firm had rated highly. In about 2007, Moody’s and other ratings companies began downgrading those securities.
“Plaintiffs must proffer some evidence demonstrating that Moody’s specific alleged misrepresentations caused the materialization of the risk that Moody’s rating practices were unsustainable,” Daniels wrote. “They fail to do so.”
Isn’t an independent judiciary wonderful?
Chatter of a US housing bubble is very fashionable:
A five-bedroom house in Las Vegas sold in mid-July for $499,000, double the price it went for three months ago. In Phoenix, a similar house sold this month for $600,000, gaining $273,000 since March.
Bubbles are inflating in Nevada and Arizona even as housing in the rest of the country recovers at a more sustainable pace. Gains in the two desert cities are the biggest since the height of the real estate boom, just before their plunge to the bottom of the national housing collapse. This year, Las Vegas and Phoenix have topped the nation in price increases, according to the S&P/Case-Shiller property-value index.
…
In May, Phoenix prices jumped 21 percent and in Las Vegas, they rose 23 percent from a year earlier. Nationally, home prices were up 12 percent from a year ago, the most since the beginning of 2006, according to the S&P/Case-Shiller index of 20 cities.
Inflation is still not a problem in Canada:
Canadian consumer prices advanced 1.3 percent in July from a year earlier on gains in gasoline and shelter, remaining below the central bank’s target for a 15th month.
Inflation quickened from June’s 1.2 percent pace, Statistics Canada said today from Ottawa, while lagging the 1.4 percent median forecast in a Bloomberg survey of 20 economists. The core rate, which excludes eight volatile products, advanced 1.4 percent after June’s 1.3 percent, also trailing forecasts for 1.5 percent inflation.
Who woulda thunk it? Monetary policy is not a cooperative game!
Federal Reserve officials rebuffed international calls to take the threat of fallout in emerging markets into account when tapering U.S. monetary stimulus.
The risk that the Fed’s trimming of bond buying will hurt economies from India to Turkey by sparking an exodus of cash and higher borrowing costs was a dominant theme at the annual meeting of central bankers and economists in Jackson Hole, Wyoming, that ended Aug. 24. An index of emerging-market stocks last week fell 2.7 percent, the steepest in two months, compared with a 0.5 percent gain in the Standard & Poor’s 500 Index.
Such selloffs aren’t an issue for Fed officials who said their sole focus is the U.S. economy as they consider when to start reining in $85 billion of monthly asset purchases that have swelled the central bank’s balance sheet to $3.65 trillion. Even as the Fed officials advised emerging markets to protect themselves, they were pressed by the International Monetary Fund and Mexican central banker Agustin Carstens to spell out their intentions better in the interest of safeguarding global growth.
“You have to remember that we are a legal creature of Congress and that we only have a mandate to concern ourselves with the interest of the United States,” Dennis Lockhart, president of the Atlanta Fed, told Bloomberg Television’s Michael McKee. “Other countries simply have to take that as a reality and adjust to us if that’s something important for their economies.”
Geez, maybe I should sue Hymas Investment Management. Not only do I have the worst boss ever, but I don’t get paid overtime:
Ontario’s Superior Court of Justice has given the green light to a class-action lawsuit against part of Bank of Montreal’s wealth management group that alleges the bank owes unpaid overtime to hundreds of current and former investment advisers.
The lawsuit alleges BMO Nesbitt Burns Inc. did not keep a proper record of the time employees worked and did not appropriately compensate employees when they worked overtime.
…
BMO Nesbitt Burns denies that the advisers have a claim on overtime pay because the nature of their work is somewhat autonomous and compensation is paid by commission, rather than by hours worked. The bank has always excluded them from overtime policies.In his reasons for certifying the action, Justice Edward Belobaba said that under Ontario’s Employment Standards Act, even commission-paid employees are entitled to overtime, and that employment standard cannot be contractually waived.
For most employees in Ontario, overtime pay is due after 44 hours of work.
Hell, less than 44 hours is part-time.
I ran across this interesting NY Times piece on Cyclically Adjusted P/E Ratios (the Shiller P/E):
Yet while this version of the P/E ratio, popularized by the Yale economist Robert J. Shiller, correctly signaled frothy markets in 1929, 1999 and 2008, some strategists argue that it may not be as accurate in gauging valuations today as it was in the past.
“There are distortions in this period of time that make it a less useful tool,” says Jeremy Siegel, a finance professor at the Wharton School of the University of Pennsylvania and author of “Stocks for the Long Run.”
…
Based on the past 12 months of earnings, for example, the Standard & Poor’s 500-stock index has a trailing P/E of around 15, which would make the market attractively priced based on historical levels, according to market strategists.By contrast, the market’s CAPE reading is nearly 22. Although that’s not as elevated as in 1929 or ’99, it is significantly higher than the market’s long-run average of around 16.
“The basic idea of smoothing out earnings over time is excellent,” Mr. Siegel says. But he points out that the current CAPE for domestic stocks includes a 90 percent annual earnings decline in the first quarter of 2009. “You’re averaging in an unbelievable hole in profits,” he says.
…
This isn’t to say that CAPE is telling investors that it’s necessarily time to sell domestic stocks. To be sure, the CAPE of the S.& P. 500 is high by historical standards. But if one’s choice is between investing in domestic stocks or in 10-year Treasury notes, the equities probably still seem the better bet, Mr. Arnott says.Mr. Shiller adds that based on more than 140 years of history, the market’s CAPE would indicate that investors should expect annualized gains of just under 4 percent a year, accounting for the effects of inflation. That’s worse than the long-run average of real annual returns of more than 6 percent for blue-chip stocks.
“But it’s not extremely low, either,” he says.
I understand that the Shiller P/E is now about 23.6.
There is some moaning in the Globe about Asian corporate debt:
Asian corporate debt as a multiple of EBITDA at the end of 2012 was higher than in any other part of the world, according to Morgan Stanley analysts. Rising funding costs and growing bad loans are prompting banks to rein in new lending. The bond market, which now accounts for over a third of corporate borrowing, is also vulnerable to rising rates and skittish investors.
…
Yet the troubling part of Asia’s corporate debt pile is the speed at which it has grown. The tide of cheap, plentiful liquidity that has washed over the region’s companies for the past four years is now receding. The combination of higher interest rates, slowing growth and falling currencies is bound to leave some companies painfully exposed.
There’s not nearly enough detail in the article to make a judgement. If liquidity suddenly dries up, then the last creditor you want is a bank – the whole point of a bond is to get a fixed term.
Bookings for goods meant to last at least three years decreased 7.3 percent last month, the most since August 2012, after a 3.9 percent gain in June, the Commerce Department said today. The median forecast of economists surveyed by Bloomberg called for a 4 percent drop.
“It’s another data point that indicates a slow recovery,” Eric Teal, who helps oversee $5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina, said by phone. “This is all pointing towards less tapering by the Fed, which is probably bullish for the stock market in general.”
It was another very good day for the Canadian preferred share market, with PerpetualDiscounts up 31bp, FixedResets gaining 11bp and DeemedRetractibles winning 45bp. The Performance Highlights table is suitably lengthy, comprised mainly of winners. 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 | -0.6619 % | 2,614.6 |
| FixedFloater | 4.31 % | 3.61 % | 34,674 | 18.12 | 1 | 0.6393 % | 3,852.4 |
| Floater | 2.57 % | 2.88 % | 68,830 | 19.97 | 5 | -0.6619 % | 2,823.0 |
| OpRet | 4.67 % | 4.12 % | 72,416 | 2.80 | 3 | 0.1038 % | 2,604.1 |
| SplitShare | 4.73 % | 4.41 % | 55,819 | 3.86 | 6 | 0.1465 % | 2,956.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1038 % | 2,381.2 |
| Perpetual-Premium | 5.81 % | 5.88 % | 111,079 | 14.01 | 12 | 0.0813 % | 2,231.5 |
| Perpetual-Discount | 5.66 % | 5.79 % | 154,611 | 14.18 | 25 | 0.3103 % | 2,280.8 |
| FixedReset | 4.96 % | 3.83 % | 246,005 | 3.88 | 85 | 0.1126 % | 2,440.5 |
| Deemed-Retractible | 5.23 % | 5.17 % | 198,359 | 6.95 | 43 | 0.4472 % | 2,316.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.A | Floater | -2.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 24.01 Evaluated at bid price : 24.26 Bid-YTW : 2.15 % |
| CU.PR.E | Perpetual-Discount | -1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 21.75 Evaluated at bid price : 22.04 Bid-YTW : 5.57 % |
| BNS.PR.Z | FixedReset | -1.06 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.35 Bid-YTW : 4.39 % |
| BNA.PR.C | SplitShare | -1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 23.90 Bid-YTW : 5.30 % |
| RY.PR.A | Deemed-Retractible | 1.00 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.15 Bid-YTW : 4.98 % |
| TRP.PR.C | FixedReset | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 22.17 Evaluated at bid price : 22.49 Bid-YTW : 3.98 % |
| SLF.PR.C | Deemed-Retractible | 1.05 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.70 Bid-YTW : 6.60 % |
| SLF.PR.G | FixedReset | 1.06 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.83 Bid-YTW : 4.45 % |
| SLF.PR.A | Deemed-Retractible | 1.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.64 Bid-YTW : 6.41 % |
| BNS.PR.L | Deemed-Retractible | 1.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 4.92 % |
| VNR.PR.A | FixedReset | 1.19 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.97 % |
| GWO.PR.R | Deemed-Retractible | 1.21 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.56 Bid-YTW : 6.13 % |
| MFC.PR.K | FixedReset | 1.21 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 4.32 % |
| ENB.PR.B | FixedReset | 1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 22.92 Evaluated at bid price : 24.10 Bid-YTW : 4.35 % |
| BAM.PR.M | Perpetual-Discount | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 5.93 % |
| TRP.PR.B | FixedReset | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 21.54 Evaluated at bid price : 21.92 Bid-YTW : 3.74 % |
| MFC.PR.F | FixedReset | 1.35 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 4.65 % |
| MFC.PR.C | Deemed-Retractible | 1.59 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.03 Bid-YTW : 6.49 % |
| GWO.PR.N | FixedReset | 1.77 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.40 Bid-YTW : 4.58 % |
| ENB.PR.F | FixedReset | 1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 22.79 Evaluated at bid price : 24.00 Bid-YTW : 4.43 % |
| SLF.PR.B | Deemed-Retractible | 2.17 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.82 Bid-YTW : 6.36 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BMO.PR.R | FixedReset | 121,000 | First day of trading. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 2.57 % |
| RY.PR.I | FixedReset | 35,050 | TD crossed 30,000 at 25.12. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : 3.85 % |
| TRP.PR.C | FixedReset | 27,645 | RBC crossed 10,000 at 22.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 22.17 Evaluated at bid price : 22.49 Bid-YTW : 3.98 % |
| PWF.PR.S | Perpetual-Discount | 20,755 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 22.05 Evaluated at bid price : 22.36 Bid-YTW : 5.41 % |
| ENB.PR.B | FixedReset | 19,975 | RBC crossed 14,900 at 24.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 22.92 Evaluated at bid price : 24.10 Bid-YTW : 4.35 % |
| TRP.PR.D | FixedReset | 18,298 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-26 Maturity Price : 23.02 Evaluated at bid price : 24.70 Bid-YTW : 4.18 % |
| There were 32 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CU.PR.E | Perpetual-Discount | Quote: 22.04 – 22.68 Spot Rate : 0.6400 Average : 0.4264 YTW SCENARIO |
| TRI.PR.B | Floater | Quote: 23.31 – 24.21 Spot Rate : 0.9000 Average : 0.7235 YTW SCENARIO |
| ENB.PR.N | FixedReset | Quote: 24.10 – 24.64 Spot Rate : 0.5400 Average : 0.3793 YTW SCENARIO |
| IAG.PR.F | Deemed-Retractible | Quote: 25.00 – 25.44 Spot Rate : 0.4400 Average : 0.2843 YTW SCENARIO |
| W.PR.J | Perpetual-Discount | Quote: 23.65 – 24.08 Spot Rate : 0.4300 Average : 0.2977 YTW SCENARIO |
| TCA.PR.X | Perpetual-Discount | Quote: 48.51 – 48.90 Spot Rate : 0.3900 Average : 0.2672 YTW SCENARIO |
i wonder how PREF shares will react today with the Syrian issue up front. gold and oil rallying, but so are bond markets, so yields falling. stocks collapsing…. all things being equal, i’d say PREFS should react positively. but i’m mostly wrong most of the time. lol
i’m mostly wrong most of the time
You and me both, brother, you and me both!
[…] corporate debt, moaned about on August 26, is attracting more attention: Asia dollar-denominated bonds have dropped below par for the first […]