Headlines of Interest

13 thoughts on “Headlines of Interest”

1. Two investment grade canadian PREFS yield around 11%
   – Transcanada Corp Pref Ser 4 (TRP-PR-H-T)
   – Brookfield Renewable Power Pref B (BRF.PRB)

   Reply

   1. Peppino do these issues withhold foreign tax, i.e. not suitable for retirement accounts?

      Reply

      1. Yes both would have Canadian withholding if your broker does not support invoking the treaty exemption.

         Reply

      2. Eben,
         There is a tax treaty between US/Canada that says no withholding on dividends from Canadian securities held in US retirement accounts like IRAs.

         The challenge is that:
         1. you have to fill out a form with your broker claiming the treaty benefit (I think I have to do that about every 5 years).
         2. the issuer has to declare the divi properly with it “flagged” for “no withholding”
         3. The issuer has to pick a good paying agent in Canada (can’t recall correct terminology) to channel the payment to the US brokers without withholding.
         4. US broker has to receive the payment from (3) and make the payment to your account without withholding.

         Some issuers/agents/brokers work flawlessly. Sometimes one or more will foul it up – and when you chase the issue, all of them point at the others as the source of the problem.
         I gave up on several Canadian issues a few years ago because they (collectively) couldn’t get it right. I have been having better luck recently with some Enbridge issues like EBBGF.

         There are discussions on this site pretty regularly of folks having problems with a specific security, but not on another.

         Reply

         1. Thanks!

            Reply

2. Well, now we know how Fulton is paying for the Republic acquisition. Don’t follow Fulton, but the Republic branch network looks like a good fit. Suspect Fulton negotiated a good price from the regulators since two earlier cash infusions / rescue attempts apparently failed and the Fulton takeover came right on the heels of the latest failed rescue attempt.

   Supply and demand. Like buying the Manager Special Marked Down for Quick Sale Sweet Potato Pie at Shop Rite. Always a good pie. Always a better price after 7:15 PM when you’re the only buyer looking at the bakery cart in front of the cash register. (I got the pie part down. Need to work on becoming part of the Public that buys for $15.00 what sells for $16.96 to the rest of the Public. )

   On a more serious note, looks like Republic had issues with Held To Maturity assets on its balance sheet, which got devalued by the magic of bond math during the Fed’s rate hike mania. Reportedly, ~$262 million of unrealized losses there. Been tempted by high yields on stranded banks, but HTM often comes up on some of the formerly “better” small banks. JMO. DYODD.

   Reply

   1. Bear, can you break down HTM?
      Lots of new folks here and I am having trouble guessing

      Reply

      1. I’ll try.

         Part 1 – Held to Maturity
         Held to Maturity is an accounting rule used by banks to value bonds they don’t intend to sell before they mature. Call it “You Don’t Lose Any Money Until You Sell” applied to banks.

         Suppose you bought $100,000 worth of Treasury Bonds with a 2.5% coupon. Your position generates $2,500 of perfectly safe income. Suppose rates go up to 5%. A bond buyer can now buy $2.500 of interest income for just $50,000 in a 5% market. He won’t pay you $100,000 for what he can buy for $50,000 in the open market. Your position is worth $50,000 to him. (Basic bond math)

         This is not a problem if you don’t need to sell. Both the 50K and 100K Treasury positions are identical in credit quality. They will both pay off at par at maturity.

         In the meanwhile, the reality is you are sitting on $50,000 worth of unrealized losses and your capital ratio has fallen by 50%. So if your depositors start a run on your bank, you may end up doing an unplanned fire sale at 50 cents on the dollar. (Or you get a margin call.) That’s why the Fed started a program during the Regional Bank Crisis to lend banks money based on face value not market value. (The Bank Term Funding Program, ended on March, 2024)
         .
         Part 2 – Available for Sale
         Just to keep you on your toes, there is another category called Available For Sale. Available for Sale is a mark to market concept: an asset is worth what somebody will pay for it. Yes, you guessed it, the same bond may have two different values.

         The Wall Street Journal goes through this is an article that nobody read, 7 comments in 5 months.

         “FASB Won’t Consider Changes in Securities Accounting After Bank Failures
         Requiring the fair value of HTM securities on the balance sheet wouldn’t greatly benefit investors because it’s already in the footnotes, rule maker says”
         https://www.wsj.com/articles/financial-accounting-standards-board-changes-33de4806

         “Under existing accounting rules, companies can report starkly different amounts for the same debt securities depending on what they say they plan to do with them. If (banks)…designate bonds as held-to-maturity securities, they are allowed to exclude unrealized losses on them from equity as long as they don’t sell. ”

         HTM and AFS might sound complicated, but I’d guess many investors think the same way. “It’s gonna come back” versus “Sell that worthless dog. ”

         Falling rates can heal HTM problems, but since the expected 6 rate cuts haven’t materialized, you do need to look closely at balance sheets. JMO, DYODD.

         Reply

   2. Bear, (off topic)
      I think sweet potato pie is not well known outside the South. I worked “down south” for a few years and learned to love it.

      Years ago at a company where I was working in California, I was drafted to judge a pumpkin pie baking contest among the ladies in HR at their thanksgiving potluck (ironic that I even got invited).

      Anyway, I tried one exceptional pie, and I gave “the look” to the gal who submitted it because I could tell she had cheated (wonderful gal from the deep south). She passed me a note that she would make another whole pie for me if I didn’t “out” her secret, which, of course, I gladly accepted. (I am not righteous enough to refuse pie-as-a-bribe). So, I carefully worded my judgement that she had made the best pie – and I didn’t tell anyone that she won because she submitted a sweet potato pie and just called it pumpkin.

      Damn. Now you got me hungry for sweet potato pie. Maybe I can get my daughter in law to make me one.

      Reply

      1. Private-
         Walmart might have you covered ( -but too sweet for me)
         https://www.walmart.com/ip/Patti-LaBelle-8-inch-Sweet-Potato-Pie-1-Count-21-oz/47386256

         Reply

         1. Thanks Gary.

            [Apologies – long post follows that is wildly off topic, but I am babysitting toddlers today and can’t do very much productive. Stop reading now if you don’t want to read my off topic rambling]

            I didn’t even know wallyworld carried them, but Bentonville Arkansas should have tipped me off….. I am at walmart at least once a week for something, but I can’t remember the last time I bought baked goods. Unfortunately, their pie is probably too sweet for me too.

            I lived overseas for so long that most “store” baked goods are just too sweet for me (all I taste is sugar). So, if it isn’t homemade, I will usually pass.

            I am a real baked-goods snob (which I say while making lunch with my 3 year old grandson – a dulce de leche sandwich on home-made Ezekiel bread with fresh strawberries, and banana bread for dessert).

            I am spoiled for choice. One of my sons bakes bread at least once a week and makes rolls every Sunday. When he gets stressed at work, he bakes even more. His wife is a master pastry chef and makes birthday cakes, etc. for the whole family (gorgeous stuff). We are never short of baked goods (and I have the waist line to prove it).

            My wife also bakes a lot (and learned all my favorites from my mom decades ago!), so I get about everything I want including fresh tortillas and fry bread pretty regularly (she makes it, then gives me grief for eating fry bread – I can’t win). Seems like there is always some dough/batter rising in our second fridge. My only job is to grind grain for her.

            Because a couple of my other grandkids have autoimmune problems, my daughter bakes literally everything for her family (bread, cakes, pies, bagels, pretzels, pizza, empanadas, Chinese pastries, – everything). She loves getting her kids involved. The teenagers will actually bake by themselves (she just asks “would you please make bagels” – and they do!)

            Luckily, I think all the bakers in the family see it as a relaxing hobby. I just get the “fringe benefits”.

            When my little granddaughters (from another son’s family) come to my house, they refuse to eat store-bought bread (even though that is what they get at home) because they want “grandma bread”, which means anything homemade by anyone. If I put a slice of store bread on the 4 year old’s plate, she will put it on my plate and say “No thank you. I don’t want that. May I please have grandma bread”. (she is working on manners). I do it just to tease her. Her older sister won’t fall for that anymore. She will just give me the icy stare and say nothing – until I remove the store bread and give her grandma bread.

            Reply

            1. Private, I moved to Northwest Arkansas from the Nooorth and a couple of foods that I don’t understand: black bean soup, okra, any type of greens (mustard, turnup, collard), black eyed peas and favor perch over catfish.

               Reply

      2. Timely comment. I just bought a pumpkin pie because there wasn’t a sweet potato pie available — the fresh baked options are apple, cherry and other — and they look and taste pretty much alike.

         Reply