PrefBlog

7 Responses to “January 20, 2010”

1. Louis says:

   January 20, 2010 at 11:12 pm

   Be worth as it may, there has been a huge iceberg sell order over BAM.PR.N at $17.90 since last Friday if not longer. given that its “sister” BAM.PR.M was trading between 18.10 and 18.25, I was buying the “N” when I would see (without watching it all day long but from time to time) a sell order for less than 17.90. I would on most of the trades touch the iceberg and chip from it one or a couple of hundreds at $17.90. I stopped doing so yesterday after having accumulated in excess of 10,000 shares of “N” at $17.90 or less. Still, the $17.90 sell order was there again today and there was more than 60,000 shares traded today and I did not buy any today.

   Being egocentric, I also feel I might have contributed to the “M” going down today with my sell order for 22,000 shares of “N” at $17.99 I have placed since Monday afternoon in the hope that the iceberg was about to be exhausted and that a lazy institutional trader would pick my order rather than having to to buy piece and bits over a lengthy time . Unfortunately, the almost identical “M” went down today to that level of 17.99 while the bloody iceberg on the “N” has preculded anyone buying my “N” yet at $17.99 such that I cannot do my usual “arbitrage” strategy, which has been pofitable so far, of selling “N” to buy “M” every time they are within 0.05 from each other and later sell the “M” to buy “N” again when the “M” are worth a quarter or more above the “N” as they so often are.

   Please let me know if I am breaking any of the unwritten “conventions” between pref traders or what is wrong with my strategy. Rgds,

2. jiHymas says:

   January 21, 2010 at 2:14 am

   Well, there it is – an offer for 22,000 shares of BAM.PR.N at 17.99. In a more sophisticated market that would have knocked the bid on the issue down at least a dime – just be grateful we’re not as efficient as NY!

   It may have contributed to the decline in M, but … who knows? Trading is like poker … you never want to get too mechanical and you have to keep the other players guessing.

   Your strategy seems fine, subject to validation of your trading rule of paying up a nickel and taking out a quarter. Validation would require back-testing (what happens if you pay up a dime and take out thirty cents?) but if it’s working for you and you’re happy with the BAM exposure then your simply supplying liquidity to a marketplace in desperate need of it.

   I will say that I would not consider showing an offer of 22,000 shares nine cents above a known iceberg, and suggest that you’re big enough that you can consider opening an institutional account with one of the dealers (if you don’t already have one) so that you can perform this swap with algorithmic software.

3. lafontaine says:

   January 21, 2010 at 10:31 am

   re pow.pr.c:

   See adverse effect on cl.pr.b

4. Louis says:

   January 21, 2010 at 2:38 pm

   Thks James.

   No I am not big / sophisticated / bright enough to open an institutional account and I do this part time. I have no clue who I should use offering algorithmic sofware (and the training that must go with it) anyway.

   You are right it was stupid on my part putting a huge sell offer not before having ensured myself that the iceberg before me had been exhausted but I thought it was about to have been exhausted given its lengthy duration and volume and the constant gap between the “M” and “N” in favour of the “M” despite that huge iceberg. Anyhow, I’ve withdrawn my sell order for 22000 of the N about an hour ago. I just put a buy order for 1200 “M” at $17.90 but, if it goes through, that will be it for my purchase of any additionnal BAM or BPO issues (now being overweight with tem) until after the next dividend payment(s) or next time they both go above $18. I am happy with BAM and the yield they give on the M & N at those prices.

   You may delete what follows should you consider it bad for the purposes of your blog but this might be a concern you should publicly address as others may share it (I also use a broker at Scotia McLeod and she confirmed to me that what I am about to write to you indeed turned out to be excellent for them in the last year or so getting new clients):

   Absolutelly no offense to you is intended here but the worst “ennemy” / biggest obstacle for independent brokers and fund managers like you in the recent times turned out to be the Bernie Madoff, Norbourg and Earl Jones of this world. It is clear to me that you and the other independent, intelligent and hard working fund managers or brokers should not suffer any comparison with those jerks but, the fact of the matter, is they gave huge (and perhaps undue value) to the comfort of a big name and to broker’s liability insurance coverage. In a nutshell, people like me would be very happy entrusting you a piece of what they manage but they (or the people for whom they do that work) would only do so after you were to joing a big name such as TD Waterhouse, Scotia McLeod, etc. (And I am telling you this candidly not having found anyone there near you knowing what he/she is talking about. This is why I am mostly stuck dealing with discount accounts with TD Watherhouse (excellent with new issues), BMO Investors Line (good tools and fast execution but stupid on some points) and/or with Royal (just awful & arrogant but, again, it shows you how much a big name has probably undue advantages you and your pairs have to fight against. This is an aspect you should perhaps write about one of these days.

   Please keep going with your excellent site and work!

5. prefhound says:

   January 21, 2010 at 6:45 pm

   Louis:

   To avoid a Madoff-like situation all you have to do is maintain custody independently of the advisor/trader. It is that simple. You can accomplish that with a discount brokerage account and trading authority to the manager, providing he is properly qualified, as I believe Mr. Hymas is.

   This will be a lot cheaper than seeking the very expensive “safety” of a bank brand. As far as I can tell, many bank advisor/managers are employed to maximize the bank’s return — not yours — in ways you are not even aware of.

6. jiHymas says:

   January 22, 2010 at 12:07 am

   I am not big / sophisticated / bright enough to open an institutional account and I do this part time.

   Hell, don’t worry about that. Neither are 90% of institutional account holders.

   I have no clue who I should use offering algorithmic sofware (and the training that must go with it) anyway.

   To a large extent you don’t need to, since (i) you might not be allowed your first choice anyway, and (ii) you might be required to get your salesman to input the order.

   All you would do is say ‘I want to buy BAM.PR.N, sell BAM.PR.M, any number of shares up to 7,800, share-for-share, pay up a nickel or less, you’ve got it firm for the day.’ Then go masturbate perform complex investment research until 4pm, when your guy will call you with your fill.

   the worst “ennemy” / biggest obstacle for independent brokers and fund managers like you in the recent times turned out to be the Bernie Madoff, Norbourg and Earl Jones of this world.

   Not to mention Boaz Manor! But thank you for sparing my tender and delicate feelings.

   In a nutshell, people like me would be very happy entrusting you a piece of what they manage but they (or the people for whom they do that work) would only do so after you were to joing a big name such as TD Waterhouse, Scotia McLeod, etc.

   Well … let me put it this way. Back in 1990-92 I was working at Richardson Greenshields. Chuck Winograd was my great-great-grandboss. His line at the time was that people did not want to have all their money in one place. They didn’t want to invest with the same shop that handled their cheques. The nineties were to be the renaissance of the mid-size independent dealer!

   When Rich Green was taken over by RBC, he found it a humbling experience. Every Saskatchewan farmer on the books called his Rich Green broker and told him … ‘By the way, I’ve also got this quarter-million tucked away here that I never told you about; but now I’d like to add it to the account.’

   HIMI’s never, ever going to be as big as Rich Green. So basically, that problem will not go away.

   This is an aspect you should perhaps write about one of these days.

   Maybe. I allude to it a few times … but it always comes out sounding very bitter!

   But I’ll tell you what I want. HIMI was always planned as a sub-advisory firm. There is no reason why a fundco (or mid-sized invetment fund, for that matter) can’t start a preferred share fund and engage HIMI’s services as manager. I’d even let them nominate a director, if the cheque looked pretty enough!

   One trouble is that the fundcos have been burned by star managers in the past (Frank Mersch, Veronika Hirsch – if I remember the name correctly) so until performance becomes a genuine sellng feature, there’s a lot of reason to stick to plain vanilla management.

   To avoid a Madoff-like situation all you have to do is maintain custody independently of the advisor/trader.

   A segregated account.

7. Louis says:

   January 22, 2010 at 1:46 am

   Thks to both of you for your replies,

   A segregated account (which I take it as giving a limited proxy to someone else to trade on the account) is not risk free either. It is, as a matter of fact, what I am myself doing as trustee for family members. I could pump out dry anyone of the accounts with low volume / wide spread stocks.

   The hourly rate basis is probably the best formula but James is giving out too much information for free on this excellent blog (I haven’t found anything comparable yet in prefs or in any other trading fields) and one then lose the necessary flexibility and speed of execution James (and, I suspect from reading your posts, you Prefhound can get exploiting detecting and trading over market anomalies).