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September 2010

Post Conversion Income Trusts
An ETF Portfolio With Added Dimension
A Peek at the The Jantzi Social Index
How Markets Fail
Time is Money
Ten Common Myths about Dividend Stocks
The Case for Small and Microcap Stocks
From Russia with Love
Renewed Interest in Corporate Bonds
The Great Correction
Mortgage Rates and Their Misconceptions
Behavioural Finance and Commuted Values
Are You Prepared for the Snowbird Travel Season?
MoneyDigest topics include: Never Outsource Your Investment Analysis To The Rating Agencies; Bank Exposure; Mosquito Consolidated Gold Mines Ltd; Reitmans Still a Buy; Western Wind Energy Corp; Artis Real Estate Investment Trust; REITs - 2011 Tax Status
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PrefPick

CM.PR.M – FixedFloater Preferred to Consider

James Hymas

The bank declared good profits in 2Q10 with improving credit quality and a gain on the structured credit run-off portfolio assisting results.

It is not the Tier 1 Ratio that is of importance for preferred share investors – we're part of Tier 1! The more important – to preferred shareholders – ratio is equity/risk-weighted-assets and this metric continued its advance to stand at 10.8% in 2Q10 compared to 10.3%, 9.5%, 9.2%, and 8.9% in prior quarters assisted by the structured-credit run-off. Risk-weighted assets declined in the quarter, as did the assets to capital multiple.

This issue has a very high Issue Reset Spread of 433bp, which means the dividend will reset to the government of Canada five-year rate plus 4.33% on every reset date if it is not called. The spread is very high since the issue was announced on February 27, 2009, when financial markets were in a very bad way.

Since the bank could now almost certainly issue new FixedResets at a spread of less than 200bp, there is a very strong likelihood that the issue will be called at the first opportunity. Those seeking a short-term investment, who are content with the all-in yield of 3.39% and who are prepared to take the risk that the issue will not, in fact be called, will find the issue an attractive price. Note that the issue will not be called only if something has gone seriously wrong with either the financial system in general or CIBC in particular. Holders will not be happy about this eventuality.
Read on...

As It Happens...
Economy & Markets
Slow growth means major rally doubtful
Dividends and gold stocks glitter
U.S. and Canadian economies to avoid double dip recessions
Bank of Canada increases overnight rate target
Canada's growing popularity with foreign investors

Currency
Scotia Capital's Global FX Research (Daily)

DRIP News
TELUS to increase wireless data network speeds
Imperial Oil Continues Existing SPP
TransAlta named to 2010 Jantzi list
Manitoba Telecom Services DRIP approved by TSX
Bell Aliant's plan for conversion to a corporation

Financial & Tax Planning
Provincial tax collection and incentives
Canadian Brokerage statements failing to deliver value
Tax Ruling on Air Reward Plans
A financially healthy retirement
56% unsure of the best investment opportunities
The Piggy Bank Index
Four-in-ten Canadians retiring with debt

Consumer
Ontario's Auto Insurance Reforms
A Look at Car Insurance Rates
Consumer complaints grow rapidly
Ontario's HST Taxable Items
Ontario move to equal pricing for prescription drugs
Mutual Funds
60% of Active Fund Managers Underperform S&P/TSX
ETF Clutter

Real Estate
U.S.-Style Home Price Correction Unlikely in Canada
Combination mortgages increasing in popularity

New Products
S&P Launches North American Preferred Stock Index
$395 Flat Fee MLS Plan
Inverse Government of Canada Bond ETF
Equal Weighted Version of the S&P/TSX 60
BMO Financial Group Expands ETF Line-Up