This is interesting … the demand for physical gold is (currently) uncorrelated with demand for gold certificates:
Austria’s Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market.
Global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won’t be enough to stem the metal’s slump according to Morgan Stanley, while Goldman Sachs Group Inc. predicts bullion will “grind lower” over 2014.
“The long-term physical buyers see these price drops as opportunities to accumulate more assets,” said Michael Haynes, the chief executive officer of American Precious Metals Exchange, an online bullion dealer. “We have witnessed some top selling days in the past few weeks.”
Gold ETFs have always struck me as being something of an internal contradiction. If the world dissolves in hyperinflation followed by chaos, do you really want to own an electronic record that gives you ownership of part of a company that holds title to some gold three thousand miles away? Although mind you, if I did want to stockpile something as chaos insurance, I’d prefer something of more practical value … books, spices, a smithy, ammunition.
We have another entry for the ‘Unintended Consequences’ competition:
Ten years ago, Congress passed a law intended to penalize chief executive officers whose companies shift their legal addresses to tax havens.
It hasn’t worked out as planned. Companies have found ways around the law that create new rewards for executives. When Actavis Inc. (ACT) changed its incorporation to Ireland in October, the New Jersey-based drugmaker helped CEO Paul Bisaro avoid the law’s bite by handing him more than $40 million of stock as much as three years ahead of its schedule, then promising him an additional $5 million to remain with the company.
The payouts to executives highlight the ineffectiveness of the 2004 law, which contained a series of provisions aimed at reducing the tax benefits of reincorporating overseas. In the past two years, a fresh wave of companies has fled the U.S. system to avoid hundreds of millions of dollars in taxes.
The 2004 law has “clearly been a failure” in halting the tax exodus, said Edward Kleinbard, a professor at University of Southern California’s Gould School of Law. “And it now has the perverse result of putting money into executives’ pockets sooner.”
The law imposes a special tax of 15 percent on restricted stock and options held by the most senior executives when a company reincorporates outside the U.S. Since the measure took effect, at least seven large companies have disclosed in securities filings that they risked triggering the tax. All took steps to shield their executives from having to pay.
The consequences of the regulators’ assault on public markets is also becoming more clear:
Facebook Inc. (FB)’s 2012 stock market debut helped spark a boom in U.S. initial public offerings, sucking the life out of a Wall Street fad that the social network had helped popularize: private share exchanges.
…
[NASDAQ honcho Robert] Greifeld’s proposed Nasdaq Private Market would help companies large and small let employees trade while avoiding the disclosure requirements and compliance standards that publicly traded firms face. A barrier was reduced in 2012 with the Jumpstart Our Business Startups Act, which quadrupled to 2,000 the number of shareholders a company could have before it needed to disclose financials.
…
To succeed, Nasdaq Private Market must persuade more companies to forgo the rewards of being public, such as the lure of greater riches and the brand recognition that comes with a ticker symbol. And only accredited investors — such as large institutions and wealthy individuals — will be eligible to buy stakes, limiting the pool of potential shareholders.
And, in the latest inflation chatter:
One of Janet Yellen’s first challenges as Federal Reserve chairman is generating enough inflation to meet the central bank’s target of 2 percent.
Policy makers have failed to attain their goal for almost two years and now are paring the pace of their bond buying. Inflation rose at a 0.9 percent rate for the 12 months ending in November, according to the central bank’s preferred measure. The last time prices were climbing at or above 2 percent was in April 2012.
…
Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a Jan. 7 speech that too-low inflation can be “a cause for real concern” because it increases the possibility a “negative shock” to the economy may lead to deflation. That could cause households to delay purchases in anticipation of even lower prices and companies to postpone investment and hiring as demand for their products dries up. Too-low inflation also means higher inflation-adjusted interest rates, making it harder to achieve a sufficient pace of growth.“Furthermore, persistently low inflation can theoretically undermine the credibility of the central bank,” said Rosengren, who dissented against the December decision to cut monthly bond buying by $10 billion. If the Fed announces a goal “but is unable to achieve that target in a reasonable time frame, some may call into question its ability to do so in the medium- or long-term as well.”
It was a quiet day for the Canadian preferred share market, with PerpetualDiscounts gaining 4bp, FixedResets flat and DeemedRetractibles up 8bp. Volatility was more than might be expected given these figures, but with no clear pattern. Volume was low; but such as there was was dominated by the RY FixedResets with the February Exchange Date.
| 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 | -0.7018 % | 2,484.6 |
| FixedFloater | 4.46 % | 3.71 % | 30,137 | 17.99 | 1 | 0.0470 % | 3,801.4 |
| Floater | 3.01 % | 3.03 % | 70,388 | 19.65 | 3 | -0.7018 % | 2,682.6 |
| OpRet | 4.61 % | 0.95 % | 79,228 | 0.34 | 3 | 0.0128 % | 2,678.3 |
| SplitShare | 4.87 % | 5.02 % | 60,206 | 4.39 | 5 | -0.0804 % | 3,013.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0128 % | 2,449.1 |
| Perpetual-Premium | 5.61 % | 1.02 % | 118,154 | 0.09 | 13 | 0.0581 % | 2,332.5 |
| Perpetual-Discount | 5.57 % | 5.62 % | 173,631 | 14.44 | 25 | 0.0354 % | 2,382.2 |
| FixedReset | 4.93 % | 3.68 % | 221,458 | 4.49 | 83 | 0.0044 % | 2,489.8 |
| Deemed-Retractible | 5.14 % | 4.16 % | 176,209 | 1.98 | 42 | 0.0793 % | 2,412.5 |
| FloatingReset | 2.66 % | 2.48 % | 199,185 | 4.29 | 6 | -0.2389 % | 2,454.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.A | Perpetual-Discount | -1.92 % | YTW SCENARIO
Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 21.43 Evaluated at bid price : 21.43 Bid-YTW : 5.46 % |
| PWF.PR.S | Perpetual-Discount | -1.29 % | YTW SCENARIO
Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 21.80 Evaluated at bid price : 22.11 Bid-YTW : 5.44 % |
| CU.PR.E | Perpetual-Discount | -1.25 % | YTW SCENARIO
Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 22.51 Evaluated at bid price : 22.88 Bid-YTW : 5.43 % |
| BAM.PR.X | FixedReset | -1.21 % | YTW SCENARIO
Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 21.26 Evaluated at bid price : 21.26 Bid-YTW : 4.30 % |
| BAM.PF.D | Perpetual-Discount | 1.16 % | YTW SCENARIO
Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 5.91 % |
| TRP.PR.C | FixedReset | 1.20 % | YTW SCENARIO
Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 21.54 Evaluated at bid price : 21.92 Bid-YTW : 3.72 % |
| FTS.PR.J | Perpetual-Discount | 1.21 % | YTW SCENARIO
Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 22.19 Evaluated at bid price : 22.50 Bid-YTW : 5.35 % |
| BNS.PR.Y | FixedReset | 1.23 % | YTW SCENARIO
Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.82 Bid-YTW : 3.51 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.N | FixedReset | 221,370 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 4.28 % |
| RY.PR.P | FixedReset | 169,296 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 4.28 % |
| RY.PR.R | FixedReset | 138,274 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 4.28 % |
| RY.PR.I | FixedReset | 67,748 | Will be extended at 3.52%. Calculated yield assumes conversion. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.77 Bid-YTW : 3.68 % |
| TD.PR.A | FixedReset | 64,817 | Called for redemption. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 3.63 % |
| BNS.PR.L | Deemed-Retractible | 54,640 | Nesbitt crossed two blocks of 25,000 each, both at 25.43. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-04-28 Maturity Price : 25.25 Evaluated at bid price : 25.46 Bid-YTW : 3.74 % |
| There were 23 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CIU.PR.A | Perpetual-Discount | Quote: 21.43 – 21.99
Spot Rate : 0.5600 Average : 0.3514YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 21.43 Evaluated at bid price : 21.43 Bid-YTW : 5.46 % |
| CU.PR.E | Perpetual-Discount | Quote: 22.88 – 23.26
Spot Rate : 0.3800 Average : 0.2424YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 22.51 Evaluated at bid price : 22.88 Bid-YTW : 5.43 % |
| BNS.PR.N | Deemed-Retractible | Quote: 25.85 – 26.14
Spot Rate : 0.2900 Average : 0.2031YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-28 Maturity Price : 25.75 Evaluated at bid price : 25.85 Bid-YTW : -0.13 % |
| TD.PR.Z | FloatingReset | Quote: 24.85 – 25.05
Spot Rate : 0.2000 Average : 0.1275YTW SCENARIO Maturity Type : Call Maturity Date : 2018-10-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 2.59 % |
| TD.PR.Y | FixedReset | Quote: 25.02 – 25.20
Spot Rate : 0.1800 Average : 0.1137YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 3.46 % |
| ELF.PR.G | Perpetual-Discount | Quote: 21.05 – 21.32
Spot Rate : 0.2700 Average : 0.2050YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-27 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 5.69 % |
James,
i certainly don’t like the gold etf’s … i much prefer the physical.. but i’m a nut bar. and as a nutbar, i don’t really think the world will dissolve into hyperinflation. ammunition, stockpiles of fuel, a secluded home with a nice sized plot of land to farm food.. yes.. all these things would be better than some coins.
in all seriousness, someone that wants to own physical gold, does it out of a distrust of things around him. i for one, do not trust governments. i don’t trust banks…
you know what i see from what happened in 2008? a bunch of wall street banks, nearly bring the whole world economy to the brink of collapse. who went to jail? what CEO lost his job? look at the payouts these people got. even the Canadian Banks got bailout funds, or they could have collapsed. meanwhile, look at the chaos they caused…
my biggest problem with the system is leverage. i don’t think anything has been solved since 2008..
no. i don’t currently own any physical gold and silver. i got married. had a baby. lol. happy. but always worried.
Nestor
I note you have RY.PR.N/P/R in Volume Highlights with a Maturity Date : 2014-03-26 rather than 2014-24-02.
Any reason?
Nestor: Another rationale behind physical gold is that it can be sewn into the lining of your clothes when you flee the country.
It isn’t so long ago that this was widespread – aristocrats fleeing Russia, Jews fleeing Germany and doubtless many lesser known or less sympathetic groups.
like_to_retire: It’s a programming bug. The system doesn’t work very well with in-the-money options that take effect within the 30-days notice period.
and i’ll bet a lot of Cypriots wish they had their money in gold coins, instead of the Bank of Cyprus…