{"id":20654,"date":"2012-12-20T23:10:34","date_gmt":"2012-12-21T03:10:34","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=20654"},"modified":"2012-12-20T23:10:34","modified_gmt":"2012-12-21T03:10:34","slug":"december-20-2012","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=20654","title":{"rendered":"December 20, 2012"},"content":{"rendered":"

An article of mine has been published in the December Advisor’s Edge Report, titled OSFI’s Academic Foray<\/a>, which discusses a paper published by OSFI titled Evidence for Mean Reversion in Equity Prices<\/a>, which they explain as<\/a>:<\/p>\n

OSFI has had discussions with some life insurance industry representatives on equity return models that incorporate mean reversion assumptions. This was done as part of its work on the use of internal models to determine capital requirements for segregated fund guarantees.<\/p>\n

OSFI has considered the question of whether such assumptions are prudent, and has decided that it will not review requests for approval to use internal models that incorporate mean reversion in equity returns.<\/p>\n

The paper \u201cEvidence for Mean Reversion in Equity Prices\u201d accompanying this letter explains the rationale behind OSFI\u2019s decision. It is being released so that industry participants and other stakeholders can better understand OSFI\u2019s views on this subject.<\/p><\/blockquote>\n

Sadly, as I conclude:<\/p>\n

The OSFI paper held great promise to explain to the investing public why it made a particular decision\u2014a practice that allows us to become more familiar with OSFI\u2019s priorities and the underlying philosophy that forms the framework for its decisions. This promise was not fulfilled.<\/p>\n

If OSFI wishes to gain credibility as a knowledgeable and effective regulator of the Canadian financial system, it needs to produce analysis at a much higher standard. Both academia and the private sector offer considerable expertise on regulatory practice, and it should be harnessed.<\/p><\/blockquote>\n

I’ll post a PDF of the article as published and of my footnoted draft version after a decent interval.<\/p>\n

ICE wants to buy the NYSE<\/a>:<\/p>\n

IntercontinentalExchange Inc., the 12-year-old energy and commodity futures bourse, agreed to acquire NYSE Euronext (NYX) for cash and stock worth $8.2 billion, moving to take control of the world\u2019s biggest equities market.<\/p>\n

IntercontinentalExchange, based in Atlanta, will pay $33.12 a share for the owner of the New York Stock Exchange, 38 percent above yesterday\u2019s closing price, according to a statement today. Both boards approved the proposal and the companies expect to complete the transaction in the second half of 2013. Last year, the U.S. blocked a joint hostile bid by IntercontinentalExchange and Nasdaq OMX Group Inc. (NDAQ) for the New York-based company on concern the combination would dominate U.S. stock listings.<\/p>\n

Merging NYSE Euronext, which owns the biggest exchanges by value of listings in the U.S., France and the Netherlands, with the second-largest futures market underscores both the growing importance of derivatives and the diminishing influence of the 220-year-old NYSE. The Big Board, once the benchmark for global free markets, has seen its share of trading in stocks listed on the exchange decline to 21 percent from 82 percent.<\/p><\/blockquote>\n

Boyd Erman in the Globe reports<\/a>:<\/p>\n

The trend of international consolidation of stock exchanges appears to be not just over, but unravelling.<\/p>\n

As part of their planned combination, IntercontinentalExchange (ICE) and NYSE Euronext say they will look to sell their European equity markets, known as Euronext, in an initial public offering.
…<\/b>
NYSE and Euronext combined. NYSE Euronext then tried another deal with Deutsche Boerse of Germany. TMX looked to merge with London Stock Exchange Plc. Singapore\u2019s market looked for a tie-up with Australia\u2019s.<\/p>\n

For various reasons, most of those deals failed. The only big one that really got done was the creation of NYSE Euronext. And Thursday, management of NYSE declared the experiment over after synergies between the companies had been limited, and the value of Euronext, such as it is, lost within NYSE. ICE executives also pointed to a need to cut down on the number of businesses the companies would run, and regulatory changes that they said make it hard to run an international stock exchange business.<\/p>\n

On a conference call to discuss NYSE Euronext\u2019s planned acquisition by ICE, NYSE chief executive officer Duncan Niederauer conceded the Euronext transaction had been a bust.<\/p>\n

\u201cWe\u2019ve yet to deliver those returns and prove that hypotheses,\u201d he said.<\/p><\/blockquote>\n

Pension chickens coming home to roost in the US<\/a>:<\/p>\n

A firefighter in Allentown, Pennsylvania, which plans to lease its water system to meet retirement costs, left last year with an annual pension of $99,289, more than double what state law says was due.
…<\/b>
The unauthorized benefits, which some cities resort to partly because they prefer pension perks over raises, add to financial burdens lingering from the recession that ended in 2009. Localities in the sixth-most-populous state face $8.5 billion in unfunded pension liabilities, according to the retirement commission.
…<\/b>
Audits of Pennsylvania cities that fall under pension restrictions show that 26 percent have given illegal benefits.<\/p>\n

One such municipality was Allentown, a city of 119,000 whose plans are 64 percent funded, according to the retirement commission.<\/p><\/blockquote>\n

Here’s a good idea from Facebook<\/a>:<\/p>\n

Facebook said the test will start with a \u201csmall number of people\u201d and will charge an unspecified fee to ensure a message gets sent to the main inbox — rather than a lower-priority queue — of another user, even a stranger. Facebook will test different fees, starting initially at about $1 per e-mail, according to a person with knowledge of the matter, who asked not to be identified because pricing is private.<\/p>\n

\u201cSeveral commentators and researchers have noted that imposing a financial cost on the sender may be the most effective way to discourage unwanted messages and facilitate delivery of messages that are relevant and useful,\u201d the Menlo Park, California-based company said on its website.<\/p><\/blockquote>\n

For years, I’ve advocated a system for eMail whereby users pay $0.01 to send each eMail, and receive $0.01 for each email received; balance remitted or billed by the ISP monthly, balances of less than $10 either way are eliminated without payment.<\/p>\n

Most individuals would receive payments, if any. Businesses would probably have to pay something, but $0.01 is a very cheap delivery charge for a legitimate business communication.<\/p>\n

You want a spam-less eMail system? That’s how you get a spam-less eMail system. But all the damn hippies chant: ‘The Internet should be free!’ and I don’t think we’ll ever see that on a public system. Hippies destroyed the Internet!<\/p>\n

It was a positive day for the Canadian preferred share market, with both PerpetualPremiums and FixedResets gaining 3bp, while DeemedRetractibles won 14bp. Volatility was low. Volume was very high.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1600 %<\/td>\n2,480.1<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.30 %<\/td>\n3.66 %<\/td>\n31,858<\/td>\n17.95<\/td>\n1<\/td>\n0.0453 %<\/td>\n3,738.2<\/td>\n<\/tr>\n
Floater<\/td>\n2.80 %<\/td>\n2.99 %<\/td>\n59,751<\/td>\n19.74<\/td>\n4<\/td>\n-0.1600 %<\/td>\n2,677.9<\/td>\n<\/tr>\n
OpRet<\/td>\n4.63 %<\/td>\n1.92 %<\/td>\n57,831<\/td>\n0.49<\/td>\n4<\/td>\n0.2586 %<\/td>\n2,594.0<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.64 %<\/td>\n4.74 %<\/td>\n58,262<\/td>\n4.39<\/td>\n2<\/td>\n0.1009 %<\/td>\n2,872.4<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.2586 %<\/td>\n2,372.0<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.25 %<\/td>\n0.65 %<\/td>\n73,718<\/td>\n0.18<\/td>\n30<\/td>\n0.0265 %<\/td>\n2,325.7<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n4.86 %<\/td>\n4.88 %<\/td>\n134,163<\/td>\n15.62<\/td>\n4<\/td>\n0.0712 %<\/td>\n2,634.6<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.93 %<\/td>\n3.09 %<\/td>\n231,013<\/td>\n4.31<\/td>\n77<\/td>\n0.0267 %<\/td>\n2,454.0<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.89 %<\/td>\n2.01 %<\/td>\n116,070<\/td>\n0.39<\/td>\n46<\/td>\n0.1425 %<\/td>\n2,421.4<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
IAG.PR.F<\/td>\nDeemed-Retractible<\/td>\n1.17 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2015-03-31
\nMaturity Price : 26.00
\nEvaluated at bid price : 26.88
\nBid-YTW : 4.05 %<\/td>\n<\/tr>\n
MFC.PR.H<\/td>\nFixedReset<\/td>\n1.55 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-03-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.18
\nBid-YTW : 3.42 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
HSB.PR.E<\/td>\nFixedReset<\/td>\n84,154<\/td>\nNational crossed 20,000 at 26.58; Desjardins crossed 50,000 at the same price.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-06-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.50
\nBid-YTW : 2.46 %<\/td>\n<\/tr>\n
RY.PR.N<\/td>\nFixedReset<\/td>\n81,232<\/td>\nRBC crossed 80,000 at 26.27.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-02-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.25
\nBid-YTW : 2.33 %<\/td>\n<\/tr>\n
NA.PR.Q<\/td>\nFixedReset<\/td>\n52,860<\/td>\nNational crossed blocks of 20,000 and 30,000, both at 26.20.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-11-15
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.18
\nBid-YTW : 2.88 %<\/td>\n<\/tr>\n
ENB.PR.T<\/td>\nFixedReset<\/td>\n52,435<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2042-12-20
\nMaturity Price : 23.13
\nEvaluated at bid price : 25.12
\nBid-YTW : 3.75 %<\/td>\n<\/tr>\n
ENB.PR.B<\/td>\nFixedReset<\/td>\n49,782<\/td>\nTD crossed 12,400 at 25.28.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2042-12-20
\nMaturity Price : 23.28
\nEvaluated at bid price : 25.24
\nBid-YTW : 3.64 %<\/td>\n<\/tr>\n
BAM.PR.K<\/td>\nFloater<\/td>\n49,349<\/td>\nScotia crossed 25,000 at 17.60.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2042-12-20
\nMaturity Price : 17.48
\nEvaluated at bid price : 17.48
\nBid-YTW : 3.00 %<\/td>\n<\/tr>\n
There were 55 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Wide Spread Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nQuote Data and Yield Notes<\/td>\n<\/tr>\n
PWF.PR.R<\/td>\nPerpetual-Premium<\/td>\nQuote: 26.75 – 27.10
\nSpot Rate : 0.3500
\nAverage : 0.2505<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-04-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.75
\nBid-YTW : 4.62 %<\/td>\n<\/tr>\n

CIU.PR.C<\/td>\nFixedReset<\/td>\nQuote: 24.70 – 25.04
\nSpot Rate : 0.3400
\nAverage : 0.2412<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2042-12-20
\nMaturity Price : 23.21
\nEvaluated at bid price : 24.70
\nBid-YTW : 2.78 %<\/td>\n<\/tr>\n

MFC.PR.C<\/td>\nDeemed-Retractible<\/td>\nQuote: 24.18 – 24.59
\nSpot Rate : 0.4100
\nAverage : 0.3155<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.18
\nBid-YTW : 4.98 %<\/td>\n<\/tr>\n

ENB.PR.D<\/td>\nFixedReset<\/td>\nQuote: 25.20 – 25.46
\nSpot Rate : 0.2600
\nAverage : 0.1685<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2042-12-20
\nMaturity Price : 23.21
\nEvaluated at bid price : 25.20
\nBid-YTW : 3.63 %<\/td>\n<\/tr>\n

PWF.PR.I<\/td>\nPerpetual-Premium<\/td>\nQuote: 25.68 – 25.93
\nSpot Rate : 0.2500
\nAverage : 0.1640<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-01-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.68
\nBid-YTW : -16.10 %<\/td>\n<\/tr>\n

PWF.PR.P<\/td>\nFixedReset<\/td>\nQuote: 25.13 – 25.35
\nSpot Rate : 0.2200
\nAverage : 0.1347<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2042-12-20
\nMaturity Price : 23.41
\nEvaluated at bid price : 25.13
\nBid-YTW : 3.02 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

An article of mine has been published in the December Advisor’s Edge Report, titled OSFI’s Academic Foray, which discusses a paper published by OSFI titled Evidence for Mean Reversion in Equity Prices, which they explain …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-20654","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/20654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=20654"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/20654\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}