There’s always a lot of political complaining about corporate short-term thinking, with the equity markets forcing managers to focus on the next quarter’s profit rather than investing for the long term. I’m never too sure about how seriously to take this. First, there seems to be quite a lot of technological advance anyway and second, long-range planning by it’s nature can often go astray and blow up the companies just as well as anything else. One way or another, there’s an interesting insight into the role of indexers:
Most of the more than $4-trillion (U.S.) that BlackRock oversees on behalf of clients is in index funds that passively track market benchmarks. Because it can’t sell individual stocks in index funds, BlackRock is, by necessity, in it for the long haul.
So instead of threatening, [Blackrock Chairman and CEO] Mr. [Larry] Fink cajoles. He writes letters. Very, very well-read letters. His latest went to the heads of all the biggest companies in the United States and Europe, hundreds of them, urging CEOs to think long term.
“As the largest index player in the world, we have to own companies, even if we hate ‘em,” Mr. Fink said in an interview on a recent visit to Toronto. “The most powerful component of our ownership is our vote, and we have to vote for what we think is in the best interests for the long term. Whether we like you or not, we are going to be an investor for the long term. We want leadership to focus on long-term strategies.”
In many ways, BlackRock’s fortunes are tied to long-run economic growth. That’s what drives stock indexes higher. It’s a rising-tide-lifts-all-boats game.
The Lapdog’s learning that sucking political arse is a risky career choice … the demands keep increasing and the promises keep accumulating:
Less than a year into his new job, Mr. Carney is getting decidedly mixed reviews from a much tougher crowd of critics. He’s already had one big flub, after he was forced to revise his stated plan to hold interest rates down until the unemployment rate fell below 7 per cent.
The jobless target was achieved two years ahead of Mr. Carney’s forecast, with unemployment hitting a five-year low of 6.8 per cent in March, and the latest jobs reports have been among the strongest in years. Still, Mr. Carney insists he won’t raise interest rates any time soon, although financial types in the City no longer find his “forward guidance” of much use. They have taken to calling it “fuzzy guidance.”
Some even label Mr. Carney a monetary “dove” who’s tempting fate. For the first time on his watch, members of the central bank’s monetary policy committee disagree over the course of action to take. The governor’s insistence that there is still too much slack in the economy to raise rates is challenged from within. His soon-to-leave deputy recently took a jab: “There is a real danger of spurious precision and the pretense of knowledge in this area.”
What’s the peak of the next interest rate cycle? Place yer bets, gents, place yer bets:
From bond yields to futures and swaps, traders see little chance the economy will strengthen enough over the course of its expansion to compel the Fed to lift its overnight rate beyond about 3.3 percent. That’s less than the historical average of 4.25 percent that New York Fed President William Dudley said would be consistent with the central bank’s current target for inflation and compares with its long-term estimate of 4 percent.
The divergence reflects deepening concern among bond investors that tepid wage growth and a lack of inflation will persist for years to come, and hold back growth as the Fed moves to end its unprecedented monetary stimulus. Lower peak rates will also reduce the likelihood of any selloff in longer-term Treasuries, which have rewarded holders this year with the biggest returns in two decades.
It was a day of modest movement for the Canadian preferred share market, with PerpetualDiscounts and DeemedRetractibles both gaining 2bp, while FixedResets were off 5bp. Volatility was low. Volume was below 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 | -0.4112 % | 2,522.7 |
| FixedFloater | 4.50 % | 3.74 % | 31,559 | 17.91 | 1 | 0.4760 % | 3,815.4 |
| Floater | 2.89 % | 2.98 % | 49,790 | 19.74 | 4 | -0.4112 % | 2,723.8 |
| OpRet | 4.38 % | -10.34 % | 34,449 | 0.10 | 2 | -0.0971 % | 2,713.7 |
| SplitShare | 4.81 % | 4.08 % | 63,426 | 4.18 | 5 | 0.1353 % | 3,112.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0971 % | 2,481.4 |
| Perpetual-Premium | 5.50 % | -10.64 % | 90,105 | 0.09 | 15 | 0.1643 % | 2,408.5 |
| Perpetual-Discount | 5.28 % | 5.30 % | 105,773 | 14.92 | 21 | 0.0182 % | 2,552.5 |
| FixedReset | 4.51 % | 3.54 % | 201,762 | 4.37 | 75 | -0.0482 % | 2,557.3 |
| Deemed-Retractible | 4.98 % | -3.16 % | 146,985 | 0.09 | 43 | 0.0180 % | 2,529.6 |
| FloatingReset | 2.65 % | 2.38 % | 152,408 | 4.02 | 6 | -0.0857 % | 2,492.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.A | Floater | -2.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-05-26 Maturity Price : 19.51 Evaluated at bid price : 19.51 Bid-YTW : 2.70 % |
| PWF.PR.L | Perpetual-Discount | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-05-26 Maturity Price : 24.03 Evaluated at bid price : 24.31 Bid-YTW : 5.29 % |
| PWF.PR.O | Perpetual-Premium | 1.05 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-31 Maturity Price : 25.25 Evaluated at bid price : 26.10 Bid-YTW : 4.83 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PF.C | FixedReset | 188,913 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-05-26 Maturity Price : 23.12 Evaluated at bid price : 25.02 Bid-YTW : 4.16 % |
| MFC.PR.D | FixedReset | 155,193 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 4.52 % |
| TRP.PR.D | FixedReset | 136,210 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-05-26 Maturity Price : 23.20 Evaluated at bid price : 25.10 Bid-YTW : 3.84 % |
| SLF.PR.F | FixedReset | 133,250 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 1.26 % |
| ENB.PR.T | FixedReset | 114,933 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-05-26 Maturity Price : 23.03 Evaluated at bid price : 24.62 Bid-YTW : 4.02 % |
| MFC.PR.L | FixedReset | 97,730 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.80 % |
| There were 25 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| HSB.PR.D | Deemed-Retractible | Quote: 25.60 – 26.33 Spot Rate : 0.7300 Average : 0.4707 YTW SCENARIO |
| PWF.PR.A | Floater | Quote: 19.51 – 20.30 Spot Rate : 0.7900 Average : 0.5875 YTW SCENARIO |
| PWF.PR.L | Perpetual-Discount | Quote: 24.31 – 24.65 Spot Rate : 0.3400 Average : 0.2622 YTW SCENARIO |
| ELF.PR.G | Perpetual-Discount | Quote: 22.30 – 22.57 Spot Rate : 0.2700 Average : 0.1974 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 25.84 – 26.08 Spot Rate : 0.2400 Average : 0.1676 YTW SCENARIO |
| ENB.PR.F | FixedReset | Quote: 24.46 – 24.66 Spot Rate : 0.2000 Average : 0.1280 YTW SCENARIO |