Husky Energy Inc. cumulative redeemable preferred T.HSE.PR.B

Why Negative Rates Most likely not going happen here....

[RagingBull3]

1)   Bank of Canada stated many times that they were at their "Effective Lower Bound" and have other tools that they will use.

2)  Negative Rates runs against the ultimate goal of wanting a Healthy growing market.  Negative means Negative.....which will put pressure on the economy to go negative.     Market growth is determined by Risk and Reward (risk vs yield).    Low/Negative Rates = Market want low/no Risk,    No Risk no Growth.........

3)  History has shown Negative Rates (or in other words no reward) are/will be BAD for the economy.     It does not have to be Interest Rates that the government manipulates, it could be anything.  No Reward = BAD.        History is littered with examples where the government tries to "HELP" but ends up doing more damage.     

4)  Rates already took a jump up......hopefully going back up to pre-Covid19 levels.


This are my opinions.... But you should always prepare for ANYTHING.   Anything is possible these days.

[wheeloffortune]

If it's bad for the economy, then why does Japan and the European Union do it??  We just copy the US.  If the US does it, we'll do it.  And Trump wants negative rates...

[RagingBull3]

It's a short term "fix" for more immediate problems.   In the short term, theory is lower interest rates promotes borrowing in which that money supposedly is put to use.  Also it lower the cost of existing debt.   So, Short term lower interest rates is seen as Boosting the Economy.     But there's a flip side to Lower interest rates....   Overall

[wheeloffortune]

Yet, the EU has had negative interest rates for 6 years now, Japan 4 years (but zero interest rates since 1999).  Not a short term fix.  Seems companies more willing to expand, hire more employees, and invest in R&D when money is cheap, not expensive.  From 2014, Germany's unemployment rate fell to 5% all the way down to 3.5% before C-19.  Canada hasn't had low

[Nakate]

Governments love negative rates there cost for the printing / borrowing  of money is minimal. This is the main reason rates are so low. Now back in the 1980's when the last time interest rates spiked the cost of goods was 10% of what they cost today and wages were more inline with prices, 40 years later money supply inflation has increased a 1000% wages have not kept up but at 1 % rates

[RagingBull3]

Low Rates = Low Reward = Low Risk = LOW GROWTH ....... not low unemployment.     Low Growth is not a Bad thing necessarily....  It's all relative.       In my example below, in both cases personal growth was 5-10%.     One in High interest rate environment, the other in a Low interest environment.     This is why Japan and Germany are

[wheeloffortune]

So why does the US have more growth when their interest rate was lower than Canada?  Our factories like GM Oshawa are shutting down.  We're only seeing natural resource growth. [/quote]

[RagingBull3]

My theory is Based on very very General Common Sense.     It applies Generally.    If cost is Zero, then people at first borrow and invest and make 10%.  Time goes by and other people see these people making 10% and say I'll be happy with 9% so they borrow also and invest and accept 9%.    Cycle continues until eventually we get down to maybe 3-4% where then

[RagingBull3]

Applying this Common Sense directly to Husky Preferreds:    If Husky is not going Bankrupt, and if Rates are not going Negative and instead remain at near zero..... Then common sense will dictate Husky Preferreds Share price will go up until Yield is in more line with other Yields. If Rates start to increase, share price will increase even more. It's all relative.    

[wheeloffortune]

You're forgetting to mention spread.   Cost is not zero.  The end borrower Corp pays a huge spread.  When Fed Int is 0.5%, Ford and Carnival are paying 11% this year to borrow a billion from a private bank.   If the Fed rate was 10%, Ford and Carnival would be paying 20.5% to a private bank.  It's never 3-4%.  At negative interest rates, Corps are

[RagingBull3]

My Theory still applies. In Fact, you demonstrate it in your example.   You said Fed 0.5%, corp pays 11%.   If Fed 10%, corp would pay 20%.   ........   See how it adjusts up and down.    So, lower the rate, lower all other rates.    But you bring up a good point.   If corps not getting the benifit of zero rates, then who is???    Who is the

[RagingBull3]

https://tradingeconomics.com/germany/gdp-growth    I wouldn't call that a sucess.    [/quote]

[wheeloffortune]

And Canada is a sucess??  Germany's unemployment has been much lower in the past 6 years.  Our GDP is only better in natural resources.  Manufacturing in Canada is dying and we have a less competitive lending environment vs Germany. [/quote]

[RagingBull3]

When you give an example of exactly what I'm saying, but then question what I'm saying.....ummmm.... It's like the whole Mask Thing.....   Taking over 6 months for people to come to the conclusion that masks might help.    And these are the "experts". [/quote]

[wheeloffortune]

So you agree with what I'm saying.  Great!  Now you understand why we need to copy Germany's & Japan's policy of negative interest rates.  [/quote]