City faces. Crown Fountain, Millennium Park, Chicago, Illinois. Copyright © 2014 Felix Choo / dingobear photography. Picture available for licensing at Alamy Images. Photo may not be reproduced without permission.
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Happy Labour Day! This is the 45th update of the Peanut Power Rankings, which takes into account data current to August 30, 2019. Thank you for continuing to read and support the Canadian Convertible Debentures Project.
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First, a quick summary of what the Peanut Power Rankings are all about. In a nutshell, the rankings are based on two main considerations: (1) a proprietary quantitative model I developed to help myself determine the "fair value" of a particular convertible debenture issue and (2) a qualitative judgment (based solely on my own humble opinion) on the particular issue, issuer, economic environment, interest rates, and other factors.
For this version of the Peanut Power Rankings, please click on the table below to read it larger. If you still find it too small to read, please download the PNG file, which then can be zoomed to a size that you prefer. For those who are looking to obtain a PDF or Excel version, please email us for more information; they can be made available for a small fee ($5).
Important!: Like everything else on this website, content here is provided as information and opinions only and not intended to be a provision of investment advice or a recommendation of any investment action in any form. There is no guarantee, warranty, representation, or other assurance whatsoever on any of the information provided. Information and opinions reflect our views as of the date provided, but may change without notice. Investments made in convertible debentures are exposed to the risk of financial losses, and as with all disseminated information concerning investments, it is highly recommended that an individual consult with a qualified investment professional before making any investment decisions.
Market Commentary - Super Quick Points (August 30, 2019)
- Hope you've had a nice summer.
- As you ought to be aware, global trade concerns and terrible politically driven trade policies have thrown uncertainty into the global economy, and central banks are on a dovish stance in response.
- I expect at least two more rate cuts from the US Fed before Christmas, and maybe one cut from the Bank of Canada (which has an overheated housing problem in Vancouver and Toronto to worry about).
- Yield curve inversion (i.e., yield on a 10-year bond is less than the yield on 2-year bond or, if you prefer, yield on a 10-year bond is less than the yield on a 3-month treasury bill) in both the US and Canada is now clearly a thing. Note that sustained yield curve inversion (based on the the 10-year and 3-month yields) in the US has successfully predicted an economic recession in each of the last seven (7) US recessions. Historically, the lead time from signal to recession is around 18 months. We will see if this predictor makes it 8 for 8 sometime around early 2021.
- Stock markets are around record highs, even with a bit of volatility in August. Note, however, we are getting to that spooky time of year in September and October where severe adverse market events or tripping hazard. Also note that stock markets tend to lead economic cycles, so if the bond market is right about recession in 18 months ...
- Not to fear-monger, but there are risks in the system. A Canadian federal election in October and, more significantly, a US presidential election next November will both be acrimonious in nature with unpredictable effects on markets.
- That said, with rates heading lower and a still (somehow) buoyant stock market, convertible debentures have exceeded all expectations so far in 2019. As measured by the Peanut Convertible Debentures Index™, convertible debentures are up 10.47% year-to-date to August 30, 2019.
- It would be unreasonable to expect this type of continued performance in the near-future, however, not with the kind of risks we are facing.
- As per usual, stay diversified out there, and focus on quality issues and returns for the long-term.
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