I talked about my fascination with the Amazon drone proposal on April 13 and it turns out that one Assiduous Reader is involved with the project up to his neck! Now some more details have been released:
In its most detailed public disclosure about a proposed service called Prime Air, Amazon is arguing that cargo drones should be allowed to take flight if the online retailer can show they’re not going to collide with planes or crash to the ground.
The drones, still in development, would mostly fly at least 200 feet off the ground, relying on sensors and computers to select a route to customers’ doors and avoid hazards, Amazon said in a request Friday to the Federal Aviation Administration seeking leniency on pending drone regulations. One Amazon employee would operate many drones simultaneously, according to the request letter.
…
The FAA’s proposed rules would block Amazon’s plans. The agency proposal wouldn’t allow drones to carry commercial cargo and would require they only be flown within sight of an operator, prohibiting flights of 10 miles (16 kilometers), or longer, envisioned by Amazon.Instead of flatly prohibiting such flights, the FAA needs to set up criteria to allow them if Amazon or other companies can demonstrate they’re safe and reliable, Misener said.
…
The Small UAV Coalition, a trade group representing companies including Amazon and Google Inc., and the Association for Unmanned Vehicle Systems International, another trade group for the drone industry, filed similar comments as Amazon.AUVSI said the FAA should drop its proposed ban of night drone flights if a user could demonstrate they were as safe as daytime operations.
…
It also highlights the cutting-edge robotics and computer technology underpinning what Amazon wants to do. If a drone loses radio contact with its operator, it must be capable of safely returning to base or landing without harming people or property, for example.Amazon envisions using automated sensors to “sense-and-avoid” other drones and obstructions, according to its letter. Except for takeoff and landing, drones would stay in a zone of 200 feet to 500 feet from the ground. Most traditional planes and helicopters fly above 500 feet.
I confess to some surprise that the major courier companies are not members of the Small UAV Coalition, but while there are reports that they’re interested in drones, they’re more interested in big ones. Small ones are deprecated; but the Big FedEx Guy sounds a lot like the guys who thought the worldwide market for computers was maybe six units:
Speaking exclusively to IBTimes UK, David Binks, the President of EMEA at FedEx Express, confirmed that the company has “had some conversations” with drone manufacturers – as it does with other technological companies, such as the manufacturers of driverless cars – but that he can only envisage a time when the robots will take a “niche” place in the delivery sector.
“That’s a topic that comes up frequently. I think drones are an interesting tech in terms of what learning we can get out of them and what they facilitate in terms of future technology. We keep an eye on that, we work with the organisations who are developing those types of technology as we do with the automotive industry, who are working on driverless vehicles,” he added.
“I can see a time when perhaps they have a niche use. I don’t know whether that would become a widespread parcel delivery network. We’d have an awful lot of drones in the sky.
“It might be for a very specific delivery opportunity in a remote area where it’s very difficult to get to. I think that type of use might be interesting in the future.”
It will be fascinating to learn how all this shakes out over the next few years; I look forward to the day when I can order beer and pizza at 4am and pick it up from the helipad on the front porch!
Assiduous Reader JP sends me yet another great link (well done, JP!) from the Economist titled Frozen: Regulators have made banking safer. But has that made markets riskier?:
TO ENSURE that it meets the 750 new rules on capital imposed in the aftermath of the financial crisis, JPMorgan Chase employs over 950 people. A further 400 or so try to follow around 500 regulations on the liquidity of its assets, designed to stop the bank toppling over if markets seize up. A team of 300 is needed to monitor compliance with the Volcker rule, which in almost 1,000 pages restricts banks from trading on their own account.
The intention of all these rules is to prevent a repeat of the bankruptcies and bail-outs of 2008. But some observers, including JPMorgan’s boss, Jamie Dimon, and Larry Summers, a former Treasury secretary, argue that in their rush to make banks safer, regulators may have created a riskier financial system. By throttling the bits of banks that “make markets” in bonds, shares, currencies and commodities, the theory goes, watchdogs have made such assets less liquid. Investors may not be able to buy and sell them quickly, cheaply and without moving the price. The consequences in a downturn, when markets are less liquid anyway, could be severe.
The problem is the elimination of the ‘three pillars’ of the financial system: banks, insurers and securities dealers. First the banks were allowed to swallow up the securities sector (or, as in the case of Goldman Sachs, securities dealers were converted willy-nilly into banks). Then banks were no longer permitted to act as securities dealers. And all this has been done without anybody, even once, thinking about what they were doing.
I have no problem with forcing the banks out of the securities business; in fact, I support the idea. But really, something should be in place beforehand, don’t you think? We need to nurture the next generation of securities dealers – I suggest that hedge funds should be, generally speaking, happy to set up trading operations … but you can bet that should they start attempting to do this, they will be vilified by regulators and self-proclaimed “investor advocates” … particularly the ones who like to parade their ignorance by demanding that bonds be exchange traded.
It was a mixed but strong day for the Canadian preferred share market with PerpetualDiscounts gaining 3bp, FixedResets up 48bp and DeemedRetractibles off 1bp. ENB and TRP FixedResets were prominent on the winning side of a lengthy Performance Highlights table. Volume was on the high side of average.
For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.
Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread
Here’s TRP:
Click for Big
TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.30 to be $0.75 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.75 cheap at its bid price of 14.71.
Click for Big
Another excellent fit (despite a sharp increase in Implied Volatility today), but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).
Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 23.50 to be $0.53 rich, while MFC.PR.L, resetting at +216bp on 2019-6-19, is bid at 21.44 to be $0.69 cheap.
Click for Big
The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.91 to be $0.59 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.70 and appears to be $0.63 rich.
Click for Big
FTS.PR.H, with a spread of +145bp, and bid at 16.35, looks $0.51 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.58 and is $0.40 rich.
Click for Big
Investment-grade pairs now predict an average over the next five years of about 0.20%, but TRP.PR.A / TRP.PR.F is an outlier at -0.77% and the new BNS.PR.Y / BNS.PR.D pair is at +0.63%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.69%0.
Click for Big
Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?
| 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 | 0.3204 % | 2,165.0 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3204 % | 3,785.4 |
| Floater | 3.35 % | 3.54 % | 56,374 | 18.42 | 4 | 0.3204 % | 2,301.5 |
| OpRet | 4.42 % | -3.69 % | 41,508 | 0.10 | 2 | 0.0984 % | 2,764.8 |
| SplitShare | 4.58 % | 4.57 % | 68,024 | 3.38 | 3 | -0.0934 % | 3,221.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0984 % | 2,528.1 |
| Perpetual-Premium | 5.33 % | 4.33 % | 65,449 | 0.09 | 25 | 0.0920 % | 2,515.9 |
| Perpetual-Discount | 5.13 % | 5.26 % | 140,526 | 15.01 | 9 | 0.0331 % | 2,783.1 |
| FixedReset | 4.50 % | 3.80 % | 288,203 | 16.49 | 86 | 0.4823 % | 2,353.9 |
| Deemed-Retractible | 4.92 % | 2.95 % | 112,950 | 0.32 | 36 | -0.0111 % | 2,646.0 |
| FloatingReset | 2.53 % | 3.07 % | 73,437 | 6.22 | 9 | -1.8712 % | 2,303.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.C | FixedReset | -1.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 15.63 Evaluated at bid price : 15.63 Bid-YTW : 3.77 % |
| MFC.PR.F | FixedReset | -1.37 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.00 Bid-YTW : 6.54 % |
| PWF.PR.P | FixedReset | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 17.66 Evaluated at bid price : 17.66 Bid-YTW : 3.65 % |
| TD.PR.T | FloatingReset | -1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 3.02 % |
| SLF.PR.E | Deemed-Retractible | -1.06 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 5.51 % |
| BAM.PR.Z | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 22.95 Evaluated at bid price : 23.85 Bid-YTW : 4.14 % |
| ENB.PR.F | FixedReset | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 4.53 % |
| BMO.PR.Q | FixedReset | 1.07 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.70 Bid-YTW : 4.10 % |
| HSE.PR.A | FixedReset | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 16.07 Evaluated at bid price : 16.07 Bid-YTW : 4.23 % |
| ENB.PR.D | FixedReset | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 19.41 Evaluated at bid price : 19.41 Bid-YTW : 4.40 % |
| ENB.PR.P | FixedReset | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.14 Evaluated at bid price : 20.14 Bid-YTW : 4.42 % |
| SLF.PR.H | FixedReset | 1.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.19 Bid-YTW : 5.25 % |
| MFC.PR.K | FixedReset | 1.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 5.01 % |
| BAM.PR.K | Floater | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 13.90 Evaluated at bid price : 13.90 Bid-YTW : 3.61 % |
| MFC.PR.J | FixedReset | 1.27 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.23 % |
| ENB.PR.T | FixedReset | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.46 % |
| ENB.PR.B | FixedReset | 1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 18.83 Evaluated at bid price : 18.83 Bid-YTW : 4.54 % |
| ENB.PF.G | FixedReset | 1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 21.27 Evaluated at bid price : 21.27 Bid-YTW : 4.53 % |
| BNS.PR.R | FixedReset | 1.54 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 2.92 % |
| TRP.PR.C | FixedReset | 1.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 3.56 % |
| IAG.PR.G | FixedReset | 1.69 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.71 Bid-YTW : 4.07 % |
| ENB.PR.J | FixedReset | 1.87 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 4.46 % |
| BAM.PR.X | FixedReset | 1.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 4.06 % |
| ENB.PR.N | FixedReset | 1.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 4.47 % |
| ENB.PF.E | FixedReset | 2.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 21.15 Evaluated at bid price : 21.15 Bid-YTW : 4.53 % |
| TRP.PR.E | FixedReset | 2.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 22.47 Evaluated at bid price : 23.30 Bid-YTW : 3.65 % |
| FTS.PR.H | FixedReset | 2.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 16.35 Evaluated at bid price : 16.35 Bid-YTW : 3.62 % |
| ENB.PF.A | FixedReset | 2.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 4.51 % |
| ENB.PR.H | FixedReset | 2.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 18.33 Evaluated at bid price : 18.33 Bid-YTW : 4.41 % |
| ENB.PF.C | FixedReset | 2.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 21.14 Evaluated at bid price : 21.14 Bid-YTW : 4.50 % |
| TRP.PR.A | FixedReset | 3.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.11 Evaluated at bid price : 20.11 Bid-YTW : 3.64 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| HSE.PR.A | FixedReset | 262,493 | RBC crossed 174,500 at 16.05, 32,000 at 16.09 and bought 10,200 from CIBC at 16.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 16.07 Evaluated at bid price : 16.07 Bid-YTW : 4.23 % |
| TD.PF.E | FixedReset | 134,940 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 23.11 Evaluated at bid price : 24.93 Bid-YTW : 3.63 % |
| GWO.PR.M | Deemed-Retractible | 75,400 | Nesbitt crossed 75,000 at 26.22. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-27 Maturity Price : 26.00 Evaluated at bid price : 26.22 Bid-YTW : 0.11 % |
| BMO.PR.M | FixedReset | 58,235 | RBC crossed blocks of 28,900 and 20,000, both at 25.22. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.22 Bid-YTW : 2.92 % |
| ENB.PR.B | FixedReset | 50,540 | Scotia crossed 10,000 at 18.72; RBC crossed 22,600 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 18.83 Evaluated at bid price : 18.83 Bid-YTW : 4.54 % |
| RY.PR.D | Deemed-Retractible | 50,030 | Scotia crossed 40,000 at 25.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-27 Maturity Price : 25.25 Evaluated at bid price : 25.23 Bid-YTW : 1.42 % |
| There were 37 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| ELF.PR.H | Perpetual-Premium | Quote: 25.50 – 26.00 Spot Rate : 0.5000 Average : 0.3155 YTW SCENARIO |
| CIU.PR.C | FixedReset | Quote: 15.63 – 16.60 Spot Rate : 0.9700 Average : 0.7925 YTW SCENARIO |
| BAM.PF.E | FixedReset | Quote: 22.70 – 23.26 Spot Rate : 0.5600 Average : 0.4338 YTW SCENARIO |
| BAM.PR.N | Perpetual-Discount | Quote: 22.60 – 22.95 Spot Rate : 0.3500 Average : 0.2357 YTW SCENARIO |
| SLF.PR.E | Deemed-Retractible | Quote: 23.25 – 23.56 Spot Rate : 0.3100 Average : 0.1994 YTW SCENARIO |
| TD.PR.T | FloatingReset | Quote: 23.80 – 24.08 Spot Rate : 0.2800 Average : 0.1743 YTW SCENARIO |
How much of your enthusiasm for drive delivery comes from assuming you will not live or play under a popular delivery route and be subject to the externality of constant humming, buzzing, and the occasional crash?
Would a properly free market system not involve individual land owners selling air rights to drone operators to capture that externality?
As an Assiduous Reader who devours every word of yours with great pleasure, may I point out a contradiction in the characterization of daily implied volatility:
Adrian
How much of your enthusiasm for drive delivery comes from assuming you will not live or play under a popular delivery route and be subject to the externality of constant humming, buzzing, and the occasional crash?
None. In the first place, the drones will fly at least 200 feet above the ground, according to the article. And according to this thesis (Figure 5.4, A-E), quadcopter noise peaks at about 60db when measured from 80cm distance; while
My assumption is that drones used to deliver things with value will be much better made than the hobbyist copters that are becoming familiar. I am confident that – as with cars and trucks – a license will require the vehicle to meet some minimum standards and I have no intrinsic objection to these standards including an achievable noise test.
According to this source:
Noise (ideally) follows an inverse-square rule when distance is increased and 10 times the distance drops the intensity by 20 dB. So if we assume that the drone is flying at an altitude of 100m, the noise will be minimal. I live in the city; if I couldn’t stand noise I’d move to Iqaluit.
When I lived in London (Ont.), my second apartment was on King Street, facing south. One block to the south of me was (by London standards) an arterial road, constantly filled with police cars and ambulances blaring their sirens; not far to the south of that was the main railroad line, constantly filled with boxcars delivering things to Toronto. One morning an overnight guest asked me how I could stand the noise … I looked at her blankly and asked “what noise?”. You get used to it.
There will be the occasional crash, just as there is the occasional crash with any other delivery vehicle. I strongly suspect that, all in, the fact that drone crashes will result almost entirely from mechanical failure will be a huge improvement over surface delivery, in which other vehicles, pedestrians, squirrels and road hazards play a strong role in encouraging crashes.
Would a properly free market system not involve individual land owners selling air rights to drone operators to capture that externality?
Well, if I get the same compensation for drone air rights as I get for airplane air rights, I’m not going to get too rich! Additionally, I will presume that for both navigational convenience and safety reasons, drone routes will follow public roads, at least in the city.
You bring up some excellent points that will have to be addressed before drone delivery becomes ubiquitous. If you can supply any links to informed discussion – with numbers! – I will be very grateful.
may I point out a contradiction in the characterization
Oopsy! Fixed it!