On Tuesday, the S&P 500 rose 1.8% and Toronto was up 1.1%.
Almost all stocks were up.
With the five year government of Canada yield once again plumbing pretty much record lows, the rate rest preferred shares once again may suffer as the outlook for higher resets dims. This is especially true for any rate reset share that will reset within the next 18 months or. The prospect of higher rates always seems to get pushed out further into the future. (Until, perhaps one day rates will suddenly go up just when we least expect.)
Bombardier’s Investor Relations people called me today to respond to a voice message I left them questioning why they were wasting their time last week disagreeing with a Moody’s downgrade instead of getting on with actually making some money and also facing up to the fact their common equity is negative $3.8 billion and that their Board of directors are a big problem.
They were friendly enough and admitted their finances are a mess. But they did express a lot optimism about turning things around in the next few years. They are not desperate for a federal government investment at the moment and so it’s not clear if that will happen.
Maybe they will turn things around, but the problem is that they are in a horrible industry and have a Board of directors with a long and horrible track record.
Still, I do think their pref shares will turn out to be a good investment. The common, I don’t know. It is so far down it could bounce back but it’s an awful big hole to dig out of.
I am actually not a fan at all of talking to management of companies. They will pretty much without exception paint a rosy picture. And once an analyst gets friendly with management, it’s harder to be critical of them. I tend to limit communication to the odd email and I never rely on management to give me any information. I use only publicly reported information.