Two Company Reports

Thu, 2015/01/29 - 2:45pm | Your editor

To my surprise, it turns out that even peoples' taste for chocolate changes with the price. Cocoa futures hit a 1-year low yesterday because less chocolate is being eaten in Europe and North America. People are cutting down because of price increases (sometimes disguised by smaller bars).

Until Sept., cocoa was one of the few commodities that had not suffered a decline last year, and the price per ton of cocoa futures hit $3400, boosted also by fear of Ebola in West Africa, where about 70% of cocoa is sourced. But then grindings of chocolate fell 17% in Q4 to a 2-yr low. Q4 is traditionally one of the top cocoa seasons for the holidays.

Now with Valentine's day cocoa grindings already more or less completed, the price is only $2715/T. I advise all chocoholics to gobble their chocolate bars while they may. (Grinding your own chocolate has an obscene meaning in French which I will not share with you. This is a family newsletter.)


The Renminbi, China's currency, has moved into 5th place in international payments, according to SWIFT, the bank transaction coordinator.. RMB accounted for 2.2% of all Dec. payments and moved up for the first time ahead of the C$ and the A$, the Canadian and Australian currencies. It is closing in on the Japanese Yen which accounted for 2.8% of Dec. transactions. The US dollar still dominates global payments, with 44.6% of all transactions, followed by the euro at 28.3% and the (British) pound sterling with 7.9%.

The missing element in these statistics is the amounts actually bein g moved. The figures relate solely to the number of transactions, not their size.

Another missing element is that China still maintains exchange controls on capital movements for investment or personal spending. The rise of the RMB came solely from payments for goods and services made by companies. However, undermining the exchange controls, banks offer RMB accounts in Hong Kong, London, Singapore, Switzerland, and London, the rise in RMB use results from opening up the RMB market.

China meanwhile is pushing down the national currency again, to improve growth prospects. Cheaper RMB let China export more and cuts down on imported goods, forcing Chinese people to buy home-produced goods. So I do not expect there to be much more liberalization to allow foreign RMB accounts to grow.


More for paid subscribers follows with a company result from India and Finland, news from the oilpatch and a boost for an Africa play from an unexpected source, and other bits of news.

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The Dollar Disease

Wed, 2015/01/28 - 3:31pm | Your editor

Catch up day with 6 newspapers to scan and piles of delayed emails would have been enough to cause a crisis, but we also have continued storm warnings for Newfoundland where the webmaster works. He is an independent contractor with a day job, and we pay him for work by the hour. When Andrew gets overwhelmed, we end up low on his to-do list and he ignores my emails.

Just when he had gotten over the death-throes of his old pet cat, Juno hit the island.

There is good news from the management side. Our website now recognizes that subscribers may come from smaller Euro-zone countries, like Ireland. A Dec. subscription from Aiden revealed the lapse in our system. It turns out to be the fault not of my site, but of the proclivities of our corporate credit card authorization account from JP Morgan Chase.

It is headed by a Greek-American, Jamie Dimon, whose cousins would be turned away if they try to make an on-line purchase. In fact, even before the Syriza victory, they would have been turned away. In fact they would never have been able to buy anything on-line. My relationship manager at the bank is half-Jamaican and half-Panamanian. None of her cousins could make on-line purchases from either country.

JPM is considered to be one of the most international US-incorporated banks. But it has a long way to go. With help from the authorization service I managed to add a bunch of countries to our list of where subscribers may sign up from. I decided that Jamaica was unlikely to produce signups, but I added lots of European places. Hong Kong, Singapore, Cyprus, Britain, Australia, New Zealand, and South Africa were already allowed, probably because we have long-term subscribers from them, and they could renew.

For protection, now that more countries can originate orders we will make it harder for people to sign up for the free version, mainly to avoid BOTs or distributed denial of service attacks. Whenever I write something mildly critical of China (starting with my notes from there when I last visited in 2008), DDS attacks begin. I do not want my editorial independence to be cut by fear of my website going down. So pre-sub signups will be blocked unless they give a full real address as well as an e-mail one. We have no intention of spamming and do not rent or sell our lists. It is to protect our business.


Readers are advised that they can help cover our overheads by signing up for a free service for evaluating their stock and bond portfolios, called Personal Capital. You link it to your brokerage accounts. I signed up when another newsletter I pay to get made the offer. Now you get a chance to help fund without any cost to you. It will give my company $10 per signup. It earns money with ads. Just click to our unique link:


As I have been predicting for a while, US export-oriented firms expect sales abroad to be hurt by the almighty dollar. And they also suffer from the conversion into greenbacks of earnings in a declinign currency. Yesterday's results (except for Apple's) are an indicator. What this means, folks, is that you need to go international. Even that proverbial locavore share, AT&T, is moving on Mexico. What's good enough for T is good enough for me. As for Apple, its great Chinese success is also at risk because Beijing is pushing its currency down. That is the dollar disease.

More for paid subscribers from Swedish conglomerates, Israeli kitchens, Dutch drilling sites, Canadian railways, Jordanian, Danish, Indian, a Mexican REIT, the usual drug dealers, gold, and more. For a change we put fund notes first:

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Trade Alert

Tue, 2015/01/27 - 3:26pm | Your editor

Trading alerts are only for paid subscribers. Join them to make money with your subscription, not just enjoy reading our big picture views.

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Die Nevi'im Sind Tod

Tue, 2015/01/27 - 1:46pm | Your editor


Die Nevi'im sind tod. That is what my first stockbroker, my great uncle Jack Oppenheim, used to say. The prophets are dead. (Nevi'im is Hebrew; the rest German.) If people out there believe in forecasts coming true, they should consider the weather warnings of yesterday.

Here in Manhattan, instead of 6 ft of driven snow, we had all of 5 inches, not counting drifts. La Guardia Airport got 11 inches. The city is silent not because of the snow but because children have been kept home from school, supermarkets have not been restocked since yesterday's panic buying, and public transport is shut down. No planes fly. The only loud noises are snow blocks falling to the street.

The snow was light and fluffy because the weather was colder than anticipated, in the teens. Our subways and buses are due to switch to Sunday schedule at mid-day.

In Boston, where predictions were of 9 ft of snowfall, they had at least a foot, also a different order of magnitude. However, Worcester (Mass.) and points west had 2 ft of snow and there may be more while islands like Nantucket suffered serious falls. The storm is now moving toward Nova Scotia where our webmaster hangs out.

The governor shut down Boston transport and children have a snow day, so nothing is moving on the cold streets. I suspect in a few hours if no further snow falls, my Boston grandchildren there will pull on their boots and build snowmen. Their Cleveland cousins will be jealous.

A vendor in Philadelphia yesterday afternoon said there too the snow stopped falling about 24 hours too early for the prophets. The wind was fierce, but the Juno winter storm was overhyped.


On the subject of Cassandra, about whom I wrote yesterday, reader LM, a NYC retired financial journalist, recalled a former colleague at the Senate Foreign Relations Committee, (before I knew her).

Karin Lissakers, later Mrs. (Martin) Mayer, was accused by Walter Wriston, then CEO of Citibank, of being “a Cassandra”, Karin quickly replied: “You forgot that Cassandra was right.”

Wriston told the press at the 1970 Business Council: “We have to get this bill passed to expand one-bank holding companies. We have to get into new lines of business and attract the best possible people to work at the banks—or we will go the way of the railroads.”

LM comments: “He didn't realize what a good prophet he was. The bill passed, and Citicorp is now, like the railroads, a ward of the government.” Swedish-born Karin is an advisor to George Soros and a journalist and speaker.


Your editor is a shareholder in Bristol-Myers, BMY, which today forecast that the strong dollar would nip its 2015 revenues to $14.4-$15 bn. It expects to earn $1.55-$1.70/sh. Earlier analysts expected sales to top $15.6 bn and earnings to hit $1.73/sh. BMY gets half its sales outside the USA but produces most of its lines inside the USA. This is a harbinger of the impact of cheaper Yen, Euros, Loonies, and Pounds Sterling this year. The big gainers of course will be foreign competitors. The results were similar for another US drugmaker, Pfizer, PFE. (BMY is also facing competition to its Abilify anti-psychotic drug from an ADR stock discussed below.)


As the stockmarket is open if falling faster than any snow, I feel impelled to blog. Corporate forecasts of their outlook are not really prophecies. They are based on data. Foreign stocks look like doing better than American ones according to the most recent forecasts for 2015.

Today we have news from Singapore, Israel, Switzerland, Canada, Britain, Ethiopia, Canada, Brazil, Portugal, Ireland, and Denmark.


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Cassandra and Abby Joseph Cohen: Female Forecasters

Mon, 2015/01/26 - 12:16pm | Your editor

My favorite comment in the recent Barron's roundtable articles is by Abby Joseph Cohen after Mario Gabelli and Bill Gross rattled on and on about the declining Japanese population and its impact on pension funds. She had said: “One part of Abenomics is womanomics. In a national where the population is shrinking, women are a good potential sources of workers.”

Mr Gabelli then replied that so are “robotics and artificial intelligence”. To which Ms Cohen rebutted: “The women have natural intelligence.”


The big news today is the great East Coast blizzard expected to grow into a nor'easter from snow that has been falling for about 3 hours and eventually pile 2 or 3 feet of white stuff on top of us.

Supermarkets here in Manhattan are packed as people load up on staples, with queues enormous and slow. Thanks to readers who sent advice about surviving snowmageddon upheavals.

The big risk is that our power and heat go down. We get both from a Con Edison co-generation plant across 59th Street, linked to my building and the rest of Sutton Place underground. Telephone and internet lines are also underground in Manhattan. If there is a power outage, the stockpile of food in the freezer is at risk and my blog tomorrow will be canceled.

The big advantage to living on a narrow island is that the snowplows (now on the front of our city garbage trucks) can dump the white stuff into the East, Harlem, and Hudson Rivers.


The euro is up and gold and the dollar are down on the Syriza victory and Alexis Tsipras being sworn in as Pr. He misstated the role of Cassandra in Greek mythology in his acceptance speech. He said the new Greek govt. will “prove the Cassandras wrong”.

As I learned the hard way some years ago by misquoting the myth, Cassandra's dreadful prophesies were always right, but nobody would believe her.


More for paid subscribers follows from the disaster center-to-be from Canada, Mexico, Spain, Portugal, Cuba, Israel, Brazil, Britain, Denmark, Hong Kong, and Switzerland. I hope things will be normal Weds when I am due to cover Investor AB's 2014 results. Today's blog is short because of the crisis, with many events and conferences canceled.

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Sunday Portfolio Update

Sun, 2015/01/25 - 1:40pm | Your editor

As every Sunday I posted updated performance tables today for pre-subscribers (on our closed positions) and paid subscribers, on our current ETF/CEF positions, and our stocks and bonds. I also posted a new set of stocks I picked for gaining from the opening to Cuba. I figured that they trade more or less at normal valuations vs Herzfeld Caribbean Basin Fund which is at a 25% premium over net asset value. Everyone can see that I sold half the fund last week.

More for paid subscribers follows.

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Nancy Drew Job

Fri, 2015/01/23 - 2:10pm | Your editor

We need Nancy Drew too.

When I was growing up in northern Manhattan, my parents had a journalist friend, perhaps a role model for me. John Kayston worked for the Jewish Telegraphic Agency. Today the JTA in Buenos Aires published an important update to the investigation of the AMIA Jewish center there:

Argentine judicial officials made public the 300-page criminal complaint that details evidence linking Argentina;s senior political echelon to a deal to hide Iran's role in the 1994 bombing of the AMIA Jewish center.

The complaint prepared by Argentine prosecutor Alberto Nisman was to be presented this week to Argentina's congress, but Nisman was found dead in his home late Sundya with a gunshot wound to his head. Pres. Fernandez de Kirchner initially called his death a suicide but backtracked Thursday following large protests and the widespread perception that Nisman [had been] murdered.

Nisman's criminal complaint, based on intelligence intercepts, accuses Kirchner of 'deciding, negotiating, and arrnanging the imputnity of the Iranian fugitives in aht AMIA case.” The president and Argentina's foreign minister, Hector Timerman, 'took the criminal decision of inventing Iran's inocence to satisfy commercial, political, and geopolitical interests of the Argentine Republic,” the complaint says.

The deal... exonerated Iranian officials in their role in the bombing, which killed 85 people, in exchange for Iranian oil and weapons sales, according to the complaint. The secret deal, the complaint says, was negotiated two years before Iran and Argentina signed a public memorandum of understanding in 2013 to establish a joint investigation of the AMIA bombing, a agreement critics derided as a farce and which later was derailed by Argentine cournts.

In the decade Nisman spent pursuing the AMIA case, he uncovered evidence showing aht Iran sponsored the bombing and had Hezbollah, its proxy militia in Lebanon, carry it out. Interpol, the international police agency, eventually issued arrest warrants from several Iranian officials in the case. The arrests have never been carried out.

Under the terms of the secret deal, the Interpol arrest warrants would have been canceled and culpability for the bombing … redirected toward 'invented defendants,' the complaint said. But despite the efforts of Argentina officials, according to the complaint, Interpol refused to play ball and the arrest warrants stand.

There is more, but you can see why Nisman was killed. Apparently both Nisman and foreign minister Timerman are Jewish, I learned from JTA.


Denmark's central bank is challenging currency speculators to test its ability to keep its peg to the euro, which may be un pari stupide, a bad bet for either the CB or the speculators. It came just a week after Switzerland dropped its similar efforts. The Danish CB signaled that it has “plenty of kroner” and can use interest rate policy and interventions to keep the currency from rising. What may help the Danes is that Copenhagen is not a global banking center nor the home of many multinational companies. But when offered a crack at proving a CB wrong, the heirs of George Soros may just decide to try it.


Poor Yingluck Shinwatra is not lucky. The military junta which deposed her now has gotten the tame legistlature to impeach her and ban her from politics for 5 years because of her stupid program of open-ended purchases of Thai rice at a high fixed price to subsidize farmers. This cost Thailand several billion dollars and was intended to boost the family's popularity in the north where the red shirts came from. Now the yellow shirts also want to put her in jail for 10 years over the alleged corruption which marked the rice-buying program. With ailing King Bhumibol, 87, the likely next long-time ruler coming to the end of his life, and with a much more fraught succession than Saudi Arabia managed, the Shinawatra clan, led from outside the country by Yingluck's billionaire Thaksin, is rumored to be close to Maha Vajiralongkorn, 62, the unpopular crown prince. Maha has 5 sons but has disowned the wives who bore them and is trying to get the newborn son of his mistress recognized and to marry her.


China plans to tax Mainland Chinese on their income even if they are non-residents, following in the extra-territorial tax system applied until now only by the USA. The latest victim of the Internal Revenue Service is London Mayor Boris Johnson, who is paying up some $40,000 in capital gains on a house he sold in London a decade ago. Only that stands between the American-born mayor and his renouncing his US nationality, acquired by being born in the US. Mayor Johnson needs to clear the decks with the IRS to be able to visit the US next month to tell Americans about the appeal of London as a financial center, as planned. His Honor left the US aged about 12 or 13 in order to attend Eton.


France and Austria want to impose a lower but broader “Tobin” tax on financial transactions by listed companies, intermediaries, buyers, or sellers of their securities (stocks, bonds, and derivatives). The EU is moving away from this plan.


Swiss bank UBS managed to get a US court to rule against the heirs of a former politician, UN official. and diplomat, Adam Malik Batubara, an Indonesian, who died over 20 years ago. He had $5 mn in secret Swiss bank accounts which the heirs tried to get their hands on via a Bahamas trust. The two banks, now both owned by UBS, used bank secrecy rules to stop the heirs collecting on the Malik estate. We offer on our website a report on the dangers of Swiss bank accounts. This is a new one.


More for paid subscribers from Denmark, Norway, Thailand, Britain, Ireland, Switzerland, Finland, Brazil, Israel, and Portugal.

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Sherlock Holmes and Dr. Watson Needed

Thu, 2015/01/22 - 2:51pm | Your editor


We need Sherlock Holmes back. And Dr. Watson. Today Pres. Cristina Fernandez of Argentina herself stated that the investigator of the Peronist government's dealings with Iran did not commit suicide and presumably was murdered before he would tell all about her involvement in a cover-up of Iranian terrorism in Buenos Aires.

The day after he announced finding evidence of a sub rosa plot to suppress evidence that Iran had been behind a murderous attack on the Buenos Aires AMIA Jewish Center in return for cheap oil, gumshoe Alberto Nisman was found shot dead in his locked apartment. He was due to testify before the Argentine Senate Congress the next day.

Initially labled a suicide, Mr. Nisman's death was then called a suspected homicide as his hands had no gunpowder traces. The gun used to kill him was found beside his body.

It seems likely Iranian officials were behind the Jewish Center bombing (plus the one a year before at the Buenos Aires Israeli Embassy). The cover-up was of murderous Teheran-organized terrorist attacks Jewish targets on Argentine soil. When I was last in BA, the rumor in the Jewish community was that the attacks had been mounted from Paraguay across the border. Now my urgent question: who killed Nisman?

One of my Argentine subscribers guesses that Cristina Fernandez watched too many episodes of House of Cards or Scandal. He suspects she is still covering something up. Being such a provincial I think she just reads Conan Doyle in Spanish.


Other mysteries today.

The head of the German Pegida anti-Islamic movement resigned after it was revealed that he had posted pictures of himself with a Hitler hairdo and a Hitler moustache. He had denied his movement was Nazi-influenced.


Israel's Mossad spy agency told US congressmen that any new sanctions would defeat the Obama Administration's attempt to negotiate to stop the Iranian nuclear program. This is counter to what PM Benjamin Netanyahu has been telling lawmakers.


After being caught flat-footed by the Swiss central bank surprise drop of the euro ceiling, markets are reacting with alacrity a week later over currency outlook changes.

The European Central Bank will spend up to euros 60 bn per month on its quantitative easing policies. Euroland stock markets rose on the news. Brazil's Central Bank raised interest 0.25% rates and its stock market also rose. Canada interest rates were cut the same amount and its shares are also up.

China injected $8 billion into financial markets, felt to be a harbinger of further financial support.


In theory, a weaker currency is good for stocks in the country where the money is being depreciated. It is bad for stocks in countries next-door where the currency is stronger.

Today's blog is late because my USB backup drive went down and took the computer with it. It is another mystery.


More follows for paid subscribers, with apologies for being so late.


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A Letter from Japan

Wed, 2015/01/21 - 2:02pm | Your editor

Chris Loew comments from Japan, mainly because I don't want to write about European Central Bank Quantitative Easing or the State of the Union discourse or the IMF growth forecasts. Chris writes:

To succeed in generating inflation, central bank policies need to make consumers and businesses believe inflation will happen. The CB therefore has to give them evidence that rising inflation means it makes sense to borrow at today’s value and pay back at a lower one.

The calculation works if they people believe that next year’s yen will be dearer than today’s. (Ed: Or next year's dollar, euro or Swissie.)

By pulling the rug out from under those who think central banks know what they are doing, the Swiss move to end the ceiling on the franc-euro exchange rates has given Japanese another reason to doubt future economic conditions.

Other Japanese indicators have already given pause to those convinced inflation will come roaring back as planned. These gauges include a continuously negative Japanese trade balance over the past 2 ½ years; the economy slipping back into technical recession in the last quarter (Q3 of FY2014-5, Japanese style); plus declining real earnings because wages failed to rise with Japanese inflation and higher taxes.

This change of mood will not spill over into Japanese politics. There really is no viable alternatives to PM Abe now. The public believes that any action program, however misguided, is better than continued passive decline.

The national mood here means that it is a good time to bargain-hunt for stocks. It also means that we should balance our holdings with some defensive Japanese positions.


More from Chris, including another Japanese buy idea and news from Portugal, Sweden, Israel, Denmark, The Netherlands, India, Switzerland, Belgium, and Australia. The main sectors today are raw materials, biotech, medical devices, internet technology, media, and telcos.

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Covering China News

Tue, 2015/01/20 - 2:24pm | Your editor

Back in the Dark Ages, your editor used to head from Paris to Davos for the World Economic Forum, a trip paid by publications she wrote for. They picked up the tab because it was the only way to meet and greet economic Chinese policy makers. China was then a closed country for the Western press. Now China has open doors but the Swiss conclave of movers and shakers (and press) has a second annual shindig for China hands.


Since I didn't get my Financial Times today I visited Xinhua News Agency for a change. I learned the latest Chinese data, which may or may not be exact, from the National Bureau of Statistics:

-- Gross domestic product (GDP) expanded 7.4 percent year on year to 63.65 trillion yuan ($10.4 trillion), the slowest pace since 1990.

-- Consumer price index, a main gauge of inflation, rose 2%, below the govt target of 3.5%.

-- Foreign trade rose 2.3% to 26.43 trillion yuan, with exports up 4.9% and imports down 0.6%.

-- In real terms, industrial value-added output rose 8.3%; fixed-asset investment 15.1%; and retail consumer goods sales 10.9%.

-- Narrow money supply (M1, covers cash in circulation plus current corporate deposits) rose 3.2%.

China's broad money supply (M2, cash in circulation and all deposits) increased 12.2%.

-- Population stood at 1.37 billion people by the end of 2014, up 0.52%. That excludes Hong Kong and Taiwan. Permanent urban residents reached 749.16 million, accounting for 54.8% of the total.

-- By the end of 2014, 772.53 million people were employed in China, up 0.36%. A total of 13.22 million new jobs were created in cities, beating the govt target of 10 million jobs.

-- Per capita disposable income of all residents rose 8% percent to 20,167 yuan, for rural residents up 9.2% and for urban residents 6.8%.


India is now ahead of China in growth but from a smaller base. China is this year is expected to adopt more stimulus measures. Its growth rate slowed in the course of 2014.

To pay for this, the Beijing govt plans to copy an oddball US tax rule: taxing Chinese citizen wherever they may reside, just as Uncle Sam taxes Americans. However the US offers non-resident Americans an exclusion for local taxes they may be subject to and another if they earn less than the equivalent of $9000. Moreover they get to exclude $99,200 from their taxes owed Uncle if they are bona fide foreign residents or lived outside the land of the free for more than 330 days in any prior 12 month period. US non-residents are also eligible to a complex benefit for higher foreign housing costs over 16% of that $99,200 figure, pro rated for the period they were non-resident. (Back when I was a non-resident the exclusion was $80,000 so it has not kept up with inflation.)

I am not sure if Chinese non-residents will have similar exlusions. China's new rule specifically excludes non-residents from Taiwan and Hong Kong whom the Chinese now consider to be their citizens. The tax code can be a tool of imperialist ambitions as well as funding.


Today we run a new stock advisory from our man in Japan, plus news from Portugal, Israel, Washington DC, Mexico (lots), Britain, Canada, the Netherlands, Colombia, India (lots) , Switzerland, Ireland, and Luxembourg.

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