{"id":26382,"date":"2014-09-25T23:58:31","date_gmt":"2014-09-26T04:58:31","guid":{"rendered":"http:\/\/prefblog.com\/?p=26382"},"modified":"2014-09-25T23:58:31","modified_gmt":"2014-09-26T04:58:31","slug":"september-25-2014","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=26382","title":{"rendered":"September 25, 2014"},"content":{"rendered":"

Michael Lewis – whose book, Flash Boys, is a favourite target for mockery on PrefBlog – had some sharp observations<\/a>:<\/p>\n

Technology entrepreneurship will never have the power to displace big Wall Street banks in the central nervous system of America\u2019s youth, in part because tech entrepreneurship requires the practitioner to have an original idea, or at least to know something about computers, but also because entrepreneurship doesn\u2019t offer the sort of people who wind up at elite universities what a lot of them obviously crave: status certainty.<\/p>\n

\u201cI\u2019m going to Goldman,\u201d is still about as close as it gets in the real world to \u201cI\u2019m going to Harvard,\u201d at least for the fiercely ambitious young person who is ambitious to do nothing in particular.<\/p><\/blockquote>\n

I don’t agree with many of his other assertions in the piece, but I liked that bit!<\/p>\n

Eddy Elfenbein of the blog Crossing Wall Street reminds us that a house is just an asset<\/a>:<\/p>\n

Some trader right now is investing in, say, copper. I wish them well. But remember that copper has no independent value. By itself, it\u2019s just an element. Not to get too philosophical, but copper\u2019s entire value is based on what it can do for us. What are the goods and services it can enhance? For that to happen, copper needs to pass though the hands of a business.<\/p>\n

This is why long-term studies of what\u2019s been the best investment usually have stocks at the top, followed by bonds and real estate followed by commodities. When you\u2019re investing in a company, you\u2019re really investing in human ingenuity\u2014the way that people can come together and figure out how to make something useful from those assets.<\/p>\n

Real estate, for example, is a nice investment. I hope everyone owns their own home. But in the long run, real estate will never, ever, ever, ever outpace stocks. Never. This isn\u2019t just my opinion, it\u2019s reality. It won\u2019t happen because it can\u2019t happen.<\/p>\n

A house is simply an asset. No matter how hard it tries, it will never be anything more than an asset. A house does its job by just sitting there. But a stock is different. A stock is part ownership in a corporation. A corporation is people using assets to create wealth. This ain\u2019t just a matter of definitions.<\/p><\/blockquote>\n

A house’s return cannot exceed inflation over the long term – who would be able to buy it? However, things over the short term can be different, and the short-term can quite possibly exceed one’s lifespan. At present, Canadian house prices are rocketing upwards and have done so for a very long time; part of the recent rise has been interest rates; longer term it has been both a revaluation (in real terms, not just nominal) of the value of having a place to live in the city, whether the city is Toronto, Vancouver or Calgary; and part of it, I think, is due to income inequality. House prices are based not on the average wage of all Canadians, but on the average wage of those Canadians who can afford to buy houses.<\/p>\n

My personal view is that a house is just a place to live. But I do know quite a few people who consider them to be investments and buy extra ones for rental purposes. Part of this is risk-aversion; while house prices can and do decline, they rarely decline by as much as equities did during the Credit Crunch. Part of this is wilful blindness; you don’t get a monthly statement from your real-estate broker giving you a solid idea of what you could get for your house if you sold it that day. Part of this is a question of control: renting out houses or speculating on them is something that you can do yourself, without any of the agency problems involved in giving your broker some money to invest on your behalf in companies run by other people, which will be valued by a third set of people. And part of it is … what if I’m wrong?<\/p>\n

US public pensions are going to cost a lot<\/a>:<\/p>\n

The 25 largest U.S. public pensions face about $2 trillion in unfunded liabilities, showing that investment returns can\u2019t keep up with ballooning obligations, according to Moody\u2019s Investors Service.<\/p>\n

The 25 biggest systems by assets averaged a 7.45 percent return from 2004 to 2013, close to the expected 7.65 percent rate, Moody\u2019s said in a report released today. Yet the New York-based credit rater\u2019s calculation of liabilities tripled in the eight years through 2012, according to the report.<\/p>\n

\u201cDespite the robust investment returns since 2004, annual growth in unfunded pension liabilities has outstripped these returns,\u201d Moody\u2019s said. \u201cThis growth is due to inadequate pension contributions, stemming from a variety of actuarial and funding practices, as well as the sheer growth of pension liabilities as benefit accruals accelerate with the passage of time, salary increases and additional years of service.\u201d<\/p><\/blockquote>\n

Here’s a milestone: Government Motors is investment grade<\/a>:<\/p>\n

General Motors Co. (GM), five years after emerging from a government-backed bankruptcy, was returned to investment grade by Standard & Poor\u2019s Ratings Services.<\/p>\n

S&P upgraded the biggest U.S. automaker to BBB- from BB+ today, citing progress in Europe, healthy cash flow and limited reputational and market share damage as a result of the company\u2019s record recalls. The ratings outlook is stable.<\/p><\/blockquote>\n

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts losing 32bp, FixedResets off 8bp and DeemedRetractibles down 10bp. Volatility was low. Volume was low.<\/p>\n\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>\n0.2339 %<\/td>\n2,683.4<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.20 %<\/td>\n3.46 %<\/td>\n24,517<\/td>\n18.43<\/td>\n1<\/td>\n0.0885 %<\/td>\n4,131.0<\/td>\n<\/tr>\n
Floater<\/td>\n2.88 %<\/td>\n3.01 %<\/td>\n59,274<\/td>\n19.70<\/td>\n4<\/td>\n0.2339 %<\/td>\n2,774.8<\/td>\n<\/tr>\n
OpRet<\/td>\n4.05 %<\/td>\n1.98 %<\/td>\n96,865<\/td>\n0.08<\/td>\n1<\/td>\n-0.0790 %<\/td>\n2,728.2<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.30 %<\/td>\n3.86 %<\/td>\n104,242<\/td>\n3.89<\/td>\n5<\/td>\n-0.1412 %<\/td>\n3,150.4<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0790 %<\/td>\n2,494.6<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.49 %<\/td>\n2.33 %<\/td>\n74,457<\/td>\n0.09<\/td>\n20<\/td>\n-0.0989 %<\/td>\n2,438.8<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.28 %<\/td>\n5.20 %<\/td>\n105,920<\/td>\n15.13<\/td>\n16<\/td>\n-0.3184 %<\/td>\n2,587.0<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.25 %<\/td>\n3.81 %<\/td>\n187,683<\/td>\n8.43<\/td>\n75<\/td>\n-0.0796 %<\/td>\n2,553.6<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n5.01 %<\/td>\n2.22 %<\/td>\n105,314<\/td>\n0.41<\/td>\n42<\/td>\n-0.0989 %<\/td>\n2,560.8<\/td>\n<\/tr>\n
FloatingReset<\/td>\n2.58 %<\/td>\n-2.37 %<\/td>\n70,136<\/td>\n0.08<\/td>\n6<\/td>\n-0.1498 %<\/td>\n2,536.5<\/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
TRP.PR.C<\/td>\nFixedReset<\/td>\n-1.45 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-09-25
\nMaturity Price : 21.39
\nEvaluated at bid price : 21.70
\nBid-YTW : 3.83 %<\/td>\n<\/tr>\n
BAM.PF.D<\/td>\nPerpetual-Discount<\/td>\n-1.33 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-09-25
\nMaturity Price : 21.27
\nEvaluated at bid price : 21.56
\nBid-YTW : 5.70 %<\/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
FTS.PR.M<\/td>\nFixedReset<\/td>\n267,530<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2019-12-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.15
\nBid-YTW : 4.01 %<\/td>\n<\/tr>\n
ENB.PF.G<\/td>\nFixedReset<\/td>\n87,196<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-09-25
\nMaturity Price : 23.10
\nEvaluated at bid price : 24.97
\nBid-YTW : 4.28 %<\/td>\n<\/tr>\n
POW.PR.C<\/td>\nPerpetual-Premium<\/td>\n70,500<\/td>\nScotia crossed 25,000 at 25.23; TD crossed 19,900 at the same price; Nesbitt crossed 25,000 at the same price again.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-10-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.20
\nBid-YTW : -7.62 %<\/td>\n<\/tr>\n
MFC.PR.C<\/td>\nDeemed-Retractible<\/td>\n49,454<\/td>\nTD crossed 40,000 at 22.73.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.70
\nBid-YTW : 5.73 %<\/td>\n<\/tr>\n
HSE.PR.A<\/td>\nFixedReset<\/td>\n35,756<\/td>\nNesbitt crossed 25,000 at 22.92.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-09-25
\nMaturity Price : 22.50
\nEvaluated at bid price : 22.90
\nBid-YTW : 3.80 %<\/td>\n<\/tr>\n
POW.PR.B<\/td>\nPerpetual-Premium<\/td>\n34,843<\/td>\nNesbitt crossed 30,000 at 24.85.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-09-25
\nMaturity Price : 24.57
\nEvaluated at bid price : 24.83
\nBid-YTW : 5.39 %<\/td>\n<\/tr>\n
There were 23 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
HSB.PR.D<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.34 – 25.91
\nSpot Rate : 0.5700
\nAverage : 0.4118<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.34
\nBid-YTW : -0.36 %<\/td>\n<\/tr>\n

SLF.PR.G<\/td>\nFixedReset<\/td>\nQuote: 21.82 – 22.13
\nSpot Rate : 0.3100
\nAverage : 0.1968<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 21.82
\nBid-YTW : 4.76 %<\/td>\n<\/tr>\n

BAM.PF.E<\/td>\nFixedReset<\/td>\nQuote: 24.61 – 24.95
\nSpot Rate : 0.3400
\nAverage : 0.2508<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-09-25
\nMaturity Price : 22.99
\nEvaluated at bid price : 24.61
\nBid-YTW : 4.26 %<\/td>\n<\/tr>\n

IAG.PR.A<\/td>\nDeemed-Retractible<\/td>\nQuote: 22.92 – 23.25
\nSpot Rate : 0.3300
\nAverage : 0.2410<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.92
\nBid-YTW : 5.70 %<\/td>\n<\/tr>\n

W.PR.H<\/td>\nPerpetual-Premium<\/td>\nQuote: 25.02 – 25.30
\nSpot Rate : 0.2800
\nAverage : 0.2050<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-09-25
\nMaturity Price : 24.80
\nEvaluated at bid price : 25.02
\nBid-YTW : 5.60 %<\/td>\n<\/tr>\n

MFC.PR.G<\/td>\nFixedReset<\/td>\nQuote: 25.81 – 26.01
\nSpot Rate : 0.2000
\nAverage : 0.1337<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-12-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.81
\nBid-YTW : 2.94 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

Michael Lewis – whose book, Flash Boys, is a favourite target for mockery on PrefBlog – had some sharp observations: Technology entrepreneurship will never have the power to displace big Wall Street banks in the …<\/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-26382","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/26382","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=26382"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/26382\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=26382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=26382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=26382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}