In the best news I’ve heard all month UBS is mandating civilized values:
The Swiss bank now has a dress code.
Apparently a memo went out this morning to equity sales at UBS informing the team that “suits are now mandatory” at the office (“swaps and the quant desk already went to suits and equity trading is switching over in two weeks”). The reason for the rule (which “is coming from Switzerland”)? To “re-establish credibility and a sense of professionalism.”
Pressure on Greece is ramping up:
European governments failed to agree on releasing a loan payment to spare Greece from default, ramping up pressure on Prime Minister George Papandreou to first deliver budget cuts in the face of domestic opposition.
On the eve of a confidence vote that may bring down Papandreou’s government, euro-area finance ministers pushed Greece to pass laws to cut the deficit and sell state assets. They left open whether the country will get the full 12 billion euros ($17.1 billion) promised for July as part of last year’s 110 billion-euro lifeline.
“We forcefully reminded the Greek government that by the end of this month they have to see to it that we are all convinced that all the commitments they made are fulfilled,” Luxembourg Prime Minister Jean-Claude Juncker told reporters early today after chairing a euro-crisis meeting in Luxembourg.
Of course, Juncker’s a liar anyway, so this could all simply be choreographed theatre.
Remember Richard Kelertas? Analyst at Dundee Securities? On June 7 I reported:
Kelertas said that the Muddy Waters report was inaccurate and there’s nothing fraudulent about Sino-Forest “to the best of our knowledge.” He recommended buying Sino-Forest shares from September 2007 until June 3, when he put his rating on the company under review.
Dundee was among institutions that helped Sino-Forest sell shares in December 2009 and also in May 2009.
…I haven’t heard such an impassioned defense of company from a dealer since Bre-X!
A couple of analysts did come to Sino’s defence, most notably Dundee’s Richard Kelertas. In a remarkable conference call on Tuesday, he jumped way outside his mandate and accused Mr. Block of committing his own fraud, calling his research “a pile of crap.”
But now he’s singing from a different hymnbook:
Richard Kelertas, an analyst at Dundee Securities, has had enough of Sino-Forest Corp. (TRE-T2.75-0.44-13.79%): He suspended coverage of the Chinese forestry company on Monday morning, after putting the stock “under review” on June 3
…
“Until such time as the company has made public the findings of the board-appointed independent committee together with the assistance of its external advisors, including legal council Osler Hoskin & Harcourt LLP and the accounting firm PricewaterhouseCoopers, and we have had time to review and analyze these findings, we are not in a position to comment on or otherwise speculate on matters as they relate to the business practice or valuation of Sino-Forest,” Mr. Kelertas said in a note.
Gee … I wonder what changed?
I continue to hold my view – held since I became sophisticated enough to read analyst reports closely – that sell side analysis should be viewed as being for entertainment purposes only. And I have to admit, Kelertas’ tergiversations are highly entertaining.
On Monday, Canadian 30-year yields started the day below 3.4 per cent. Other than a few weeks last fall, these rates are the lowest Ottawa has seen since the mid-1950s, noted Bank of Montreal deputy chief economist Doug Porter.
Richard Fisher of the Dallas Fed reprised a funny line in his speech titled Containing (or restraining) systemic risk – the need to
not fail on “too big to fail”:
For example, some of you may recall the public letter written by 364 eminent economists predicting disastrous consequences that would result from Thatcher’s policy initiatives. That letter was published in the Times of London on March 30, 1981.[Footnote] The British economy began a recovery almost immediately afterward, in 1982; by 1983, inflation and mortgage rates were at their lowest levels in over a decade, while economic growth accelerated. The failure of the consensus view led Chancellor of the Exchequer Geoffrey Howe to define an economist as “a man who knows 364 ways of making love, but doesn’t know any women.”[Footnote]
YLO issues weren’t all that interesting today.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 3bp, FixedResets gaining 4bp and DeemedRetractibles down 10bp. Volatility picked up. Volume was a bit above average, with all highlighted issues being FixedResets. Nesbitt owned the board today.
| 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 | 0.0934 % | 2,470.4 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0934 % | 3,715.4 |
| Floater | 2.45 % | 2.22 % | 39,290 | 21.74 | 4 | 0.0934 % | 2,667.4 |
| OpRet | 4.88 % | 3.35 % | 66,336 | 0.92 | 9 | -0.0430 % | 2,430.8 |
| SplitShare | 5.24 % | -2.46 % | 62,172 | 0.49 | 6 | 0.1760 % | 2,501.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0430 % | 2,222.8 |
| Perpetual-Premium | 5.65 % | 5.24 % | 142,345 | 0.91 | 12 | 0.1052 % | 2,077.3 |
| Perpetual-Discount | 5.47 % | 5.57 % | 117,741 | 14.45 | 18 | 0.0281 % | 2,174.9 |
| FixedReset | 5.16 % | 3.33 % | 198,528 | 2.80 | 57 | 0.0391 % | 2,309.2 |
| Deemed-Retractible | 5.09 % | 4.91 % | 293,183 | 8.18 | 47 | -0.1041 % | 2,149.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| ELF.PR.F | Perpetual-Discount | -1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-20 Maturity Price : 22.23 Evaluated at bid price : 22.58 Bid-YTW : 5.97 % |
| GWO.PR.N | FixedReset | -1.05 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.75 % |
| BNS.PR.Y | FixedReset | -1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 3.39 % |
| FTS.PR.F | Perpetual-Discount | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-20 Maturity Price : 23.37 Evaluated at bid price : 23.60 Bid-YTW : 5.23 % |
| TDS.PR.C | SplitShare | 1.17 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-15 Maturity Price : 10.00 Evaluated at bid price : 10.40 Bid-YTW : -2.46 % |
| GWO.PR.J | FixedReset | 6.69 % | Meaningless bounce-back from June 17. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.80 Bid-YTW : 3.07 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| FTS.PR.H | FixedReset | 127,043 | Nesbitt crossed two blocks of 60,000 each at 25.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-20 Maturity Price : 25.30 Evaluated at bid price : 25.35 Bid-YTW : 3.65 % |
| BMO.PR.M | FixedReset | 112,563 | Nesbitt crossed 100,000 at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-24 Maturity Price : 25.00 Evaluated at bid price : 26.18 Bid-YTW : 2.87 % |
| BMO.PR.O | FixedReset | 105,652 | Nesbitt crossed 100,000 at 27.74. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-24 Maturity Price : 25.00 Evaluated at bid price : 27.74 Bid-YTW : 2.87 % |
| SLF.PR.G | FixedReset | 63,738 | Nesbitt crossed 47,500 at 25.15. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 3.81 % |
| BNS.PR.P | FixedReset | 57,523 | Nesbitt crossed 50,000 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.08 Bid-YTW : 2.98 % |
| TD.PR.Y | FixedReset | 52,298 | Nesbitt crossed 50,000 at 26.26. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-30 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 3.36 % |
| There were 34 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| ELF.PR.F | Perpetual-Discount | Quote: 22.58 – 23.05 Spot Rate : 0.4700 Average : 0.3388 YTW SCENARIO |
| TD.PR.O | Deemed-Retractible | Quote: 25.11 – 25.45 Spot Rate : 0.3400 Average : 0.2230 YTW SCENARIO |
| SLF.PR.F | FixedReset | Quote: 27.05 – 27.35 Spot Rate : 0.3000 Average : 0.2067 YTW SCENARIO |
| TD.PR.Q | Deemed-Retractible | Quote: 26.09 – 26.39 Spot Rate : 0.3000 Average : 0.2267 YTW SCENARIO |
| BMO.PR.L | Deemed-Retractible | Quote: 26.59 – 26.86 Spot Rate : 0.2700 Average : 0.1973 YTW SCENARIO |
| TCA.PR.X | Perpetual-Premium | Quote: 50.49 – 50.72 Spot Rate : 0.2300 Average : 0.1607 YTW SCENARIO |
I notice in the volume highlights you’ve changed the YTW scenario for BMO.PR.L to a Maturity Date of 2014-06-24 from a previous Maturity Date of 2017-06-24 (at PAR).
Looking back through PrefLetters I see you made that change in the latest June edition as it had been 2017 in previous editions (with regard to deemed retractables).
Can you shed some light on this change. Does it have anything to do with the “CIBC’s Machinations in Late May”?
No, this is entirely price-dependent. Given the current price of 26.59, the YTW Scenario is currently based on a call 2014-6-24 at 25.75, yied 4.63%
If called at par on 2017-6-24, the realized yield will be 4.69%
Ahh, so the issue is acting like a standard Perpetual-Premium that is selling above the call price, and this is not a result of its deemed-retractable status.
Bingo!
[…] I have not yet seen any updated commentary from Richard Kelertas of Dundee Securities, whose changing views on the topic were discussed here on June 20. […]