Jim Kelsoe, proud portfolio manager of the worst bond fund in the history of the universe (so far), was last mentioned on PrefBlog on April 7, 2010. Now he’s been barred from the industry:
According to the SEC’s order, through his actions Kelsoe fraudulently prevented a reduction in the NAVs of the funds that should otherwise have occurred as a result of the deterioration in the subprime securities market in 2007. His misconduct occurred in the context of a nearly complete failure by Morgan Keegan to employ the fair valuation policies and procedures adopted by the funds’ boards of directors to fair value the funds’ portfolio securities.
Under the settlement, Morgan Keegan is required to pay $25 million in disgorgement and interest and a $75 million penalty to the SEC to be placed into a Fair Fund for the benefit of investors harmed by the violations. Morgan Keegan will pay $100 million into a state fund that also will be distributed to investors. The firms are additionally required to abstain from involvement in valuing fair valued securities on behalf of investment companies for three years. Kelsoe agreed to pay $500,000 in penalties and be barred from the securities industry by the SEC, and Weller agreed to pay a penalty of $50,000.
The Fed is going to maintain an easy monetary policy:
To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee continues to anticipate that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
The TMX-LSE deal has been sweetened:
A week before the London Stock Exchange and TMX Group Inc. ask shareholders to bless their planned marriage, the pair sweetened the pot Wednesday with a $4 per share special dividend for TMX shareholders.
London exchange shareholders will also receive a special dividend of 84.1 pence per ordinary share, payable on closing.
In the face of a rival hostile bid from Maple Group, a consortium of Canadian financial firms, the exchange partners said they also intend to increase the regular post-merger dividend “to be consistent with the [higher] current regular dividend of TMX Group.”
Here’s an interesting legal point – I know that some will misconstrue my interest and I’ll get into all kinds of trouble about this, but what the hell – regarding Galliano’s anti-semitic rant:
Under sentencing rules for hate speech, Galliano faces a maximum 22,500-euro ($32,500) fine and six months in prison if found guilty. His lawyer, Aurelien Hamelle, has said similar cases “most often” result in fines rather than jail time.
Geraldine Bloch, who filed a complaint over the February incident, testified that Jewish “was one of the terms said the most” in Galliano’s slurs against her. “I don’t know if he was drunk. He was a bit bizarre. He sweated a lot.”
Galliano’s addictions can’t excuse his statements, Eric Zerbib, a lawyer for LICRA, an international organization opposed to racism and anti-Semitism, said before today’s testimony.
It doesn’t explain and it doesn’t excuse anything,” said Zerbib. “In vino, veritas. In wine, the truth. Wine has a liberating effect which allows one to know an individual’s real personality, and given that the deeds were repeated several times, thus we know John Galliano’s personality.”
OK, so I don’t know the law here, but it’s rather an interesting point: Will Galliano be in trouble for having a shitty personality (which is exposed by drunkenness, yay! Or he may simply have reached in to the bag of tricks for the most offensive things he could think of.) or for expressing his personality (in which case drunkenness may be considered a mitigating factor)?
It was a good day on the Canadian preferred share market with PerpetualDiscounts up 15bp, FixedResets winning 11bp and DeemedRetractibles gaining 13bp. Volatility was up a bit. Volume was very good.
PerpetualDiscounts now yield 5.53%, equivalent to 7.19% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 5.25% (!) so the pre-tax interest equivalent spread is now about 195bp, a significant widening from the 185bp reported on June 15 as yields have gone in opposite directions.
| 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 | -0.1634 % | 2,465.5 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1634 % | 3,708.1 |
| Floater | 2.46 % | 2.22 % | 38,190 | 21.74 | 4 | -0.1634 % | 2,662.1 |
| OpRet | 4.88 % | 3.22 % | 65,062 | 0.91 | 9 | -0.2057 % | 2,433.4 |
| SplitShare | 5.25 % | -0.48 % | 62,674 | 0.48 | 6 | 0.0833 % | 2,505.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2057 % | 2,225.2 |
| Perpetual-Premium | 5.66 % | 5.20 % | 143,364 | 1.37 | 12 | 0.0016 % | 2,076.2 |
| Perpetual-Discount | 5.47 % | 5.53 % | 121,211 | 14.58 | 18 | 0.1455 % | 2,182.1 |
| FixedReset | 5.16 % | 3.34 % | 209,697 | 2.79 | 57 | 0.1148 % | 2,310.0 |
| Deemed-Retractible | 5.08 % | 4.89 % | 287,247 | 8.18 | 47 | 0.1299 % | 2,153.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.E | Deemed-Retractible | -1.01 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 5.66 % |
| BMO.PR.H | Deemed-Retractible | 1.10 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-03-27 Maturity Price : 25.00 Evaluated at bid price : 25.81 Bid-YTW : 3.63 % |
| GWO.PR.G | Deemed-Retractible | 1.32 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.57 Bid-YTW : 5.44 % |
| ELF.PR.F | Perpetual-Discount | 2.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-22 Maturity Price : 22.76 Evaluated at bid price : 23.01 Bid-YTW : 5.86 % |
| GWO.PR.J | FixedReset | 2.59 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.52 Bid-YTW : 3.51 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.E | Perpetual-Premium | 134,455 | Nesbitt crossed 100,000 at 25.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-11-30 Maturity Price : 25.00 Evaluated at bid price : 25.34 Bid-YTW : 5.20 % |
| NEW.PR.C | SplitShare | 106,500 | Nesbitt sold two blocks of 10,000 each to TD at 14.20, and six blocks of 10,000 each to anonymous, all at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-26 Maturity Price : 13.70 Evaluated at bid price : 14.14 Bid-YTW : -26.56 % |
| RY.PR.B | Deemed-Retractible | 68,825 | Desjardins bought two blocks of 10,000 each from anonymous, both at 24.77. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 4.89 % |
| BNS.PR.L | Deemed-Retractible | 60,305 | TD crossed 25,000 at 24.54. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.60 Bid-YTW : 4.80 % |
| GWO.PR.N | FixedReset | 52,534 | Desjardins crossed 41,200 at 24.45. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.45 Bid-YTW : 3.78 % |
| BNS.PR.P | FixedReset | 50,892 | RBC crossed blocks of 25,000 and 20,000, both at 26.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.10 Bid-YTW : 2.94 % |
| There were 48 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TD.PR.P | Deemed-Retractible | Quote: 25.91 – 26.33 Spot Rate : 0.4200 Average : 0.2624 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 25.30 – 25.75 Spot Rate : 0.4500 Average : 0.3058 YTW SCENARIO |
| PWF.PR.A | Floater | Quote: 23.51 – 23.99 Spot Rate : 0.4800 Average : 0.3592 YTW SCENARIO |
| TD.PR.R | Deemed-Retractible | Quote: 26.33 – 26.68 Spot Rate : 0.3500 Average : 0.2307 YTW SCENARIO |
| PWF.PR.O | Perpetual-Premium | Quote: 25.35 – 25.66 Spot Rate : 0.3100 Average : 0.2277 YTW SCENARIO |
| SLF.PR.G | FixedReset | Quote: 25.33 – 25.60 Spot Rate : 0.2700 Average : 0.1882 YTW SCENARIO |
Hi…quick question about last prefletter. I’ve seen this other times, but here is a clear example:
With respect to TRP.PR.B and TRP.PR.C, TRP.PR.C has a higher dividend, higher reset price and higher market price (both are above $25); however, your model evaluates TRP.PR.C to perpetuity, but TRP.PR.B, to its reset date. What am I missing? Why doesn’t TRP.PR.C get evaluated to its reset date?
TRP.PR.C does resets a year later which could create a small difference depending on the yld curve, but I don’t think that’s the answer.
[…] the comments to the June 22 report, Assiduous Reader drap1 asked: Hi…quick question about last prefletter. I’ve seen this […]
[…] spread (also called the Seniority Spread) is now about 185bp, a narrowing from the 195bp reported June 22 due to the move in long-term corporate […]