On Trump

Wed, 2016/07/27 - 2:18pm | Your editor

Russell Jones, writing for www.Llewellyn-Consulting.com attacks what he calls the “10 tenets of Trumponimics”, styled “a litany of simplistic ideas [with] little coherencde that run against much the US has stood for since 1945.” But he finds two comforts: first that the Trump positions are “in a state of flux” so some of “the rougher edges will be chiselled off”. Moreover, by preventing Trump from doing what he plans, “the US constitution could prove to be the world's saviour [sic]”.

Like many commentators he questions some Trump dogmas, like that the US is “one of the most highly taxed economies in the world” and needs tax cuts triple the size of those set up by a more classic Republican, George W. Bush in 2001 and 2003. The British economist questions whether such “yuge” cuts could pay for themselves and expects that they lead to higher taxes on top wealth brackets. For Jones, cutting govt spending by eliminating waste and foreign aid, getting better value from the defense budget, closing the Environmental Protection Agency and the Dept of Energy, and killing Obamacare do not make a convincing program.

To force US creditors to accept a haircut is what a real estate debtor—but not a government—might come up with. Jones styles Trump's ideas on taxes, spending, and debt as full of “inconsistencies and irrationalities” which only a believer “in an absurdly extremist Laffer curve” can make add up. Trade protectionism could lead to “higher prices, lower quality, and less choice” for Americans. Criticism of the Fed might lead to dilution of its independence, Jones warns.

Trump immigration plans would take years and billions to implement and would “reduce output and undermine long-term growth.” The Donald's wavering support of raising the minimum wage also contradicts Republican Party free-market doctrine. Repealing Dodd-Frank would hurt smaller US banks by allowing larger banks “to return to pre-crisis bad habits.” Bringing in “smart businessmen from Wall Street to run the economy” (quoting Donald Trump) won't work. Wall Street is likely to “help policy cater to [its] interests” and not those of America overall.

There is another contradiction between Trump's claims that he support free markets and his promises “of re-opening shuttered steel plants” and “interventionism to curry favour with vested interests.” “Consistency is conspicuous by its absence,” says Jones. “This inventory of policy proposals, striking [in] its naiveté and incoherence”, is a “litany of simplistic ideas with no guiding principle, clear direction [or way they] might fit together to deliver short-terms macroeconomic stability or improved long-term growth or flexibility.”


Mr Jones did not mention the Trump claim that US unemployment is secretly massaged by the Dept of Commerce and really stands at 42%. And by writing in the UK he did not know the the Republican candidate backed Russian hackers who published material from the Democratic National Committee and were told to hack Hillary Clinton. Quoth Trump: “Russia, if you're listening, I hope you're able to find the 30,000 emails that are missing... You will be mightily rewarded by our press.” As the only member of the press writing here today I would not reward Vladimir Putin for cyberspying on Hillary Clinton.

More for paid subscribers from Britain, Spain, the Dutch Antilles, Bermuda, Israel, Cameroons, Cote d'Ivoire, Senegal, Tanzania, Denmark, China, France, Australia, Chile, Mexico, and Hungary including 5 company reports plus a bonus one. Heavy reporting schedule.

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From Real Estate to Politics

Tue, 2016/07/26 - 1:33pm | Your editor


In NYC after flying home from Amsterdam yesterday, taxiing from JFK airport last night I passed the Trump Pavilion on the roadside, part of Jamaica Hospital. That was a donation of The Donald's father, a big real estate developer in Queens, where the airport and the hospital are located. The move to Manhattan was by his son, the Republican presidential candidate.

I was reminded of a 19th century real estate developer, Leonard Jerome, father of Jenny, who married Randolph Churchill. His two other surviving daughters also married into the British and Irish aristocracy. What Trump did for Queens, Jerome père did for Brooklyn and The Bronx, developing the amenities around the two boroughs' Jerome Avenues where he built homes: including the Belmont and Sheepshead Bay Race Tracks, Jerome Park and Reservoir, and the Jerome Stakes. Then as now property development and politics are closely linked, although it took an extra generation to get to Winston Churchill, Leonard's grandson.


More for paid subscribers from Spain, Canada, Mexico, China, Brazil, France, The Dutch Antilles, Germany, Portugal, Panama, and Britain.

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Sat, 2016/07/23 - 4:00pm | Your editor

Brexit has hit. The UK purchasing managers index (PMI) fell to 47.7 to mid-July (July 12-21) from 52.4 in mid-June. Anything below 50 marks a decline economic activity. The newly published figures from the Markit/CIPS survey cover both manufacturing and services. Sterling fell about 1% to $1.31. The Eurozone PMI meanwhile barely fell from June's 53.1 to 52.9. That's the bad news.

The good news is that the level in early 2009 during the global financial crisis was lower still. The other good news is that export sales rose boosted by the cheaper pound. Moreover the Bank of England and the government are going to prevent economic decline if numbers come in bad again next month with stimulus and tax cuts.

Nancy Drew thinks she may know where stolen copies of The Economist wind up. Copies were being offered for the full price by foreign youths on foot on the Kings Road in Chelsea, a different part of London from Tower Hamlets.

Asia Times reports that 2 Singapore street food stalls – Hill Street Tai Hwa Pork Noodle (Crawford Lane) and Hong Kong Soya Sauce Chicken Rice and Noodle (Chinatown) – were granted a Michelin star each last week, the first stars ever awarded to street food hawkers.

There will be no tables this Sunday and no blog on Monday when we will fly home via Amsterdam. Here is some news from Britain, Canada, Israel, Ireland, Brazil, Sweden, the Dutch Antilles, and India. There are two results, and a tender offer  to report.

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Getting The Economist in the East End

Fri, 2016/07/22 - 9:38am | Your editor


For the second week in a row, our friendly local newsagent could not give us the copy of The Economist we has asked him to hold for us. The newspapers and magazines are delivered here in Docklands by a truck arriving about 5 am which dumps them outside the store which the family only opens at 7 am. On Friday, thieves snatch the magazine which costs £5 and then sell them to other newsagents at a discount which the Indian owner suspects is about half. He is sure that the other local newagent, a Turk (who doesn't sell The Economist) is not the bent vendor, but this is a big city with many newsies.

The last time we were here for a long period we tried to get our US sub delivered to our London base, which resulted in a total screw-up because we had to start a new subscription on our return to the USA. A a reverse address change on a sub was not among the magazine's computer system options. While advertising across the pond works (we have used it), the subscription databases are unlinked. I think it would be a good idea to get them to communicate with each other in the magazine's two major markets and am sending this note to the mag in the hope they will take my advice. I will accept a free ad in return for my brilliant suggestion.

More for paid subscribers follows from Britain, Ireland, Germany, Canada, Spain, the Netherlands, Chile, Israel, Switzerland, and Mexico including 2 new company reports. There will be no blog Monday as I am flying back to NYC (where the same issue of The Economist will probably be waiting for me.)

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Finding Muslim Shoppers

Thu, 2016/07/21 - 7:53am | Your editor

What we need to get are Muslim shoppers. Around 30 of the 84 people killed at the Nice Bastille Day festivities by an Islamic terrorist truckdriver were themselves Muslims. This suggests a way to deal with this spate of self-radicalization to ISIS among Muslims in Western countries. We need to remind other Muslims that they are likely to become victims of terrorism by their relatives or neighbors or mosque acquaintances.

As Muslims realize that supposed religious zeal leading to murder will murder them and their loved ones, they have an incentive to stop the havoc by informing against zealots in their midst. They can be on the lookout for sudden bursts of piety in a petty criminal, or advocacy of terrorism, or sign-ups on extremist websites. They should be encouraged to shop these potential murderers.

Leaving it to Muslims themselves to shop deadly extremists among them is the best way to squelch terrorism at source. Remind the Imams and their congregations that if the new Jihadists cannot kill Israelis or Shias in the Middle East to gain instant entry into Paradise despite their sins, they will kill their co-religionists in the West.


Italy is working out a way to bail out what may be the oldest bank in the world, 544 years old, the Monte dei Paschi di Siena, without violating the European Union ban on state support for bankrupt banks which must be sold at market prices rather than refinanced by taxpayers. The EU rules require that banks' creditors must take a haircut when they are recapitalized.

The problem is that many Italian small savers hold euros 231 bn of Monte debt and there is an election coming. So the Rome govt has a work round in sight, to refinance its official bailout backstop fund, Atlante, so it can securitize the bonds held by individual investors in Monte. If this is not done, there will be a tempest at balloting time, and more suicides (two have already occurred along with two earlier govt rescues of Monte).

A work-round EU regulations will again delay need Monte reform, the result of decades of misrule by bankers, regulators, politicians, and marketeers. This nonsensical outcome is another nail in the EU coffin, because the regulators are allowing Italy to do what they prevented Greece and Portugal from attempting over their bust banks. It is not just Brexit that puts the European Union's future at risk.


Greece meanwhile has repaid Greece €2.64 bn in debt it owes to the European Central Bank and other creditors yesterday from the money it gots in its 3rd bailout in return for a batch of financial reform measures passing a Brussels “performance review.”

You don't want to rely on a hyper-cautious and secretive central bank allergic to PR for fiscal policy. The ECB has today left rates and stimulus unchanged at its first post-Brexit meeting. Bank of Japan Governor Haruhiko Kuroda broadcast that there was no need and no possibility of “helicopter money” in a BBC radio interview this morning after the yen fell to a new low against the US$. The interview caused the yen to jump the most in almost a month against the US$ but it may have taken place in June. Bad PR is another CB failing.


Bloomberg reports that when hackers broke into computers at Bangladesh’s CB early this year and central bank in February and sent fake payment orders, the US Federal Reserve was tricked into paying out $101 mn. But the losses could have been 10x higher had the name Jupiter been part of the address of a Philippines bank where the wanted the money sent. By chance, Jupiter was also the name of an oil tanker and a shipping company under US sanctions against Iran. That stopped 90% of the money from going to Manila.


More for paid subscribers on 4 trades plus news from Brazil, Britain, Germany, Israel, Singapore, China, India, Canada, and The Netherlands.

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The Bremain Risks

Wed, 2016/07/20 - 8:12am | Your editor

While much attention is focused on the British risk over its eventual likely exit from the European Union, I also look closely at the inherent contradictions within the EU which will continue whatever Britain does. There is risk galore among the Bremain countries remaining in the EU.

The euro, the common currency, which Britain never shared, is suffering from an inherent problem because of the wide range of different growth and deficit patterns among its members. Without a single unit of account, a country could boost its output by a devaluation of its money, something southern European countries and Ireland would have been able to do had they not been locked into parity with Germany after the euro was adopted in 1999.

In their move to an 'ever closer union', from the terms of the Treaty of Rome which originated the EU, countries are required to adopt 4 'freedoms'.

First they agree to allow free trade in goods. There will be no long-term tariffs across EU borders, although the use of national standards often has a similar impact to charging duty. The standards however are being centralized if slowly and, by the way, annoyingly. Setting the shape of cucumbers allowed to cross borders without hindrance is an example.

This means the rules are written by bureaucrats and cost companies money to comply.

Then the EU members agree to allow free movement of workers. They will not be discriminated against in favor of locals when they cross borders. This part of the treaty was opposed by the inhabitants of Boston (in the UK not in Massachusetts), upset that their cabbage harvest is being brought in by Romanians willing to do the grunt work more cheaply than the Bostonians. Britain's Boston had the highest vote for Brexit in England.

But, in fact, almost every EU country has a gripe about free movement, most notably the nationalistic  former eastern European new members like Slovakia, Poland, and Hungary. And the refugee influx from the Muslim world and Africa means that free movement has become impossible in any case. Borders are not open for people to move freely. Any crackdown on terrorism will add to the border obstacles.

Third comes the right of establishment and provision of services,  in fact not available, since national standards, licensing, and rules cover who may provide services. Hair-dressing or toilet repairs, driving cabs or pleading before the bar, running a hotel  or teaching children, remain under national or even regional regulation. The service sector is local in almost every EU country. But in an effort to overcome these differences, Brussels has undertaken swingeing rule-writing over the most trivial aspects of services, causing resentment among those who now have a license it is seeking to undermine.

Last is free capital movement, also nullified in fact by regulations whose purpose may be to limit money-laundering by criminals or evasion of taxes, but whose impact is to block cross border capital movements. This is the part of EU membership Britain is most anxious to retain. However over-regulated and obstacle-laden, financial services are what makes Britain great, and it want to continue to offer them on existing terms all over the EU. Ambitious rivals, like France and Germany, will plot to complicate matters, hurting not only the exiting British, but also other countries with a liberal approach to money services, from Estonia to Ireland, from Luxembourg to The Netherlands.

In fact European monetary policy cannot be set by all-nighter meetings of the member countries or their elected reps. They are too irreconcilable. It is being left to the European Central Bank's 'super' Mario Dragi to try to reconcile the grouping's conflicting policy aims: growth and employment, a stable euro, and low inflation. Nobody elected Drahi and most countries have a bone to pick with his compromises. There is no European monetary policy, no European fiscal policy, no European regulation of banks (except over state aid).

Focusing on what is splitting Europe regardless of what Britain wants shows that it its future is not secure. The influx of refugees created an unresolved split between countries welcoming young blood like Germany and others who want to maintain their good old monolithic social structure and homogenized ethnicity. Europe is a patchwork of different languages and religions the natives want to defend. The Holocaust reminds us that those of a different religion (not necessarily Jews) and a different ethnicity (not necessarily Roma or gypsies) can become targets. Britain was most execised about Polish immigrants, who more or less look like them, but tend to be Roman Catholic rather than Anglican. Similar NIMBYism afflicts the remain countries.

The unresolved Greek financial crisis and the potential blowup of Italian banks shows that common rules on capital movement conflicts with national needs. And with divergent growth patterns and continued deficit spending in the “Club Med” countries, the gap with Germany and Holland, the countries able to meet the rules, and the rest, will grow.

These internal EU contradictions have been thrown into the spotlight by the British vote. And dissidents in other countries can demand the right to another referendum à l'anglaise, supported by populist parties from the left or the right. The vote could open the door to further exits from the EU by countries ranging from first founders France and Italy to newer members Poland or Hungary (over immigration). Financial issues could lead to a Greek exit. Saving our jobs from Brussels leveling might lead to even Germans crying 'raus'. In fact the whole experiment may come to an end.

In fact, while I regret this, I think the whole EU experiment in unification may fail over the coming decades. And being tougher than necessary with Britain—to stop home-grown imitators—will not stop the move to the exits.


More for paid subscribers today starting with a company quarterly, with news from Germany, India, Bermuda, Panama, Costa Rica, Canada, Britain, the Dutch Antilles, Israel, Japan, South Korea, Colombia, and Greece.

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Toppy Markets?

Tue, 2016/07/19 - 6:14am | Your editor

Today markets feel toppy.

The Turkish putsch failed to discourage Japan whose market reopened after a holiday. The Nikkei index resumed trading with another gain as Japanese investors get ready for more government economic stimulus. Ben Bernanke, former head of the Fed, was spotted visiting his Japanese counterpart during the 4-day weekend, which further triggered optimism over tax and interest rate cuts.

The only exception from the bullishness was Softbank, sold off because it is already deeply in debt and now may be overpaying for Arm plc which it is acquiring. Interestingly enough, the negotiations over the takeover took place in Turkey ten days ago.

The Japanese stock market is in a risk-on phase and a reversal is likely. And not just there.

The British stock index hit a new 2016 high yesterday and sterling briefly went to $1.33, also because of the Arm deal. Brokers are looking for other UK listed companies which may become takeover candidates, starting with Arm's Internet of Things rivals, Imagination Technologies and Allied Minds. Other ideas are companies bid for earlier which still are independent, like RSA, the insurance firm which Zurich failed to nab last year along with other insurers like Aviva and Prudential. Even Royal Bank of Soctland which the UK government wants to exit its 80% shareholding in rose yesterday. Chemical producers Victrex and Polypipe are others brokers signal may be bid for. Drug companies Shire and Astra Zeneca are also said to be targets. AZN may enter the fray over Medivation to stop a bid.

It is not that simple. Bids do not necessarily lead to copycat bids, particularly when, as with the Softbank deal, the first ones are viewed unfavorably by the home market. And unless you have insider information, which is illegal, do not buy any share in the hopes of being bought out.

If a foreign company has piles of sterling from its retained earnings, it might be a bidder, to use the depreciated currency strategically. This was pointed out by expert Marc Chandler of Brown Brothers Harriman who has written insightful articles since the Brexit vote on how it can all go wrong. His most recent missive warns that Britain's aim to delay signing article 50 of the EU treaty to negotiate terms of its exit before a 2-year deadline is struck, may be undermined by other terms of the treaty like article 7. Chandler also says that while UK commercial banks may win “passporting” rights to retain access to other European markets by adopting common standards, this may not apply to investment banks and funds. Moreover, British laws going forward would have to copy every change in EU banking regulations to keep that door open.


We have news from our companies in Israel, India, Spain, Britain, The Netherlands, Germany, Sweden, Mexico, The Philippines, Ireland, and Switzerland.

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Two Cheers for the Mother Country

Mon, 2016/07/18 - 8:19am | Your editor

There is something to be said for The Mother Country.

The British do not do coups except bloodlessly, within political parties.

Their former trained soldiers don't mass murder policemen because British veterans may not legally own guns. And their cops do not shoot black men because most of them also do not carry guns.

There is now a second woman heading its government.

The 13% drop in the pound sterling is luring in foreign investors.


The Turkish coup attempt, easily and bloodily suppressed by president Recep Tayyip Erdogen, is being followed with a purge of the army and, more importantly, the judiciary, the only part of the power structure which has been able to oppose hisincreasingly autocratic regime. Three thousand people have been arrested including many judges and the death penalty is being reinstated. It was abolished in 20014 when Turkey had hopes of entering the EU, now dashed.

Pres. Erdogen demanded that the US hand over Muslim cleric Fethullah Gulen, whom he blames for supporting the uprising and “at war with Turkey. However US Secy of State John Kerry riposted the without evidence, this charge is “irresponsible”, and added that the US “is not harboring anybody”. Gulen used to back Erdogen but after a falling out moved to Pennsylvania.


Daniel Rapaport of Leumi Capital Markets in Israel was probably the first to comment on the Turkish coup attempt and its aftermath, because Israeli stock markets are closed on Friday and open on Sunday. He told Globes Israel:

"Turkey is a developing market. To put things in perspective, it should be recalled that the leading indices on Wall Street have risen 5% so far this year, our market has fallen by about 4.5%, while the Turkish market has risen by 15%. It can be assumed from this that the effect of the weekend's events in Turkey will be profit taking on the Turkish market and a strengthening of the lira, but no broader effect is to be expected." The lira is up today because of government support but Goldman Sachs expects it to fall to 3.1 to the US$ from its earlier forecast of 2.95 to the dollar. The Istanbul bourse is down about 5% today but has further to fall."

Rapaport thinks Europe will continue to under-perform in comparison with America: "The US reporting season began optimistically. All in all, the economy there is all right, the macro data are positive, and so it looks as though the trend there will continue." I am waiting until the bulk of Q2 results come in this week before sticking my neck out.

Mr Rapaport's comments on Israeli stocks are below, for paid subscribers.

Today there is news of foreign firms buying British assets cheaply after the Brexit vote. Japan's Softbank is near a deal to buy Internet of Things firm ARM Holdings plc paying a near 50% premium over its Friday closing price, £24.3 bn, about $32 bn. And there is more, three further buys in beaten down Britain, detailed for paid subscribers below. The paid subscriber report starts here with news mostly from Britain, but with items from Finland, Ireland, Sweden, Norway, Spain, India, China, Papua-New Guinea, Canada, Mexico, Bermuda, and Israel starting with a quarterly report.

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The Church Fete

Sun, 2016/07/17 - 8:22am | Your editor

It is a July Sunday in London and we plan to visit the local church fete, on condition the heavy clouds do not turn into rain. I am not sure that the prayers of members of the Church of England get God to do something about the weather.

The other New York-born big-mouth politician with funny blond hair has still got to apologize to Turkey's Pres. Recep Tayyip Erdogan who has defeated a military coup. Luckily Boris Johnson, called "the Trump with a Thesaurus", who accused Erdogan of having had sex with a goat, may get some leeway. While he insulted the trio of US White House inhabitants and aspirants--Obama, Clinton, and Trump--they may back Brois against Erdogan trying to get the US to deliver Turish Muslim cleric Fethullah Gulen to his tender mercies, for having allegedly inspired the coup. Read more »

Terrorism by Truck; Diplomacy by Insult

Fri, 2016/07/15 - 9:15am | Your editor

Theresa May is taking a lesson from Lyndon Baines. Johnson by giving the Brexit Tories so many jobs in her cabinet, starting with the appalling Boris Johnson as Foreign Minister. This is causing all those he has insulted in the past to recoil: women like Hillary Clinton (whom he compared to “a sadistic nurse in a mental hospital”); African-Americans like Pres. Obama (accused of moving out a Churchill bust from the Oval Office because of “his part-Kenyan ancestral dislike of the British Empire”); other Blacks who are “piccaninies”; Turkish President Recep Erdogan (who “sowed his wild oats with the help of a goat”). This despite being of part-Turkish ancestry himself and, at the time, a dual national holding a US as well as a UK passport.

Cheer up, Boris also insulted his fellow big-mouthed blond politician with a weird haircut: “the only reason I wouldn't go to some parts of New York is the real risk of meeting Donald Trump.”  Boris and other supporters of Britain leaving the European Union have all been given jobs working on Brexit, meaning they will have to produce the good results their rhetorical fantasies promised during the referendum campaign.

Or to quote US President LBJ, “it is better that they are in the tent pissing out rather than outside it pissing in.” The leave campaigners now have to negotiate better terms than former PM David Cameron was offered—or face an end to their political careers, starting with Boris. Promises about how leaving the EU would allow stiff immigrant control, financial service passporting, less regulation, more free trade with non-EU countries, faster economic growth, more money for the National Health Service, whatever, will have to be fulfilled by those who made the promises.


You don't need guns to murder people, as was shown by a truck-driver terrorist in Nice during the Bastille Day festivities yesterday which at last count killed 84 people and wounded a hundred more.


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