Bears in the China Shop

Mon, 2012/03/05 - 1:00pm | Your editor

  There are bears in the China shop.

Addressing the annual meeting of China's rubber-stamp parliament for the last time before he is due to retire, Premier Wen Jiabao delivered a starting forecast for growth in 2012. Instead of a target GDP growth level of 8% which has been standard for years (and usually exceeded), he called for growth of 7.5% to be generated by domestic and military spending.

Meanwhile the revelations about princeling Chongqing Communist Party secretary Bo Xilai continue to emerge, as well as on the corruption of his chief cop, Wang Lijin, who at one point appeared to be seeking political asylum in the US embassy. In today's Financial Times, you learn about how the police in the largest city in the world tried to extract money from an alleged Mafioso, who merely was a successful businessman.

Bo is probably not going to get onto the Central Committee after all but I am truly frightened by the existence of a hard-line Maoist element in the top ranks of China favoring another cultural revolution. This time, to quote the Chongqing slogan, they want China to ''sing red and smash black'', sing old revolutionary songs and cut down those who have become wealthy.

The impact of Wen's National People's Congress speech was immediate on companies shipping raw materials to China in its own time zone, Australia. It then spread to other commodity companies, like Alcoa. And to the emerging markets overall.

The Chinese lowball forecast and scandal has hurt almost all stocks. The market, which has risen steadily for nearly 3 months was looking for an excuse to fall.

A warning: Any recipients of our e-mail blogs who redistribute them to non-subscribers will be removed from the rolls. Violators of copyright moreover do not qualify for a refund of subscription fees. Don't share,

More about our stocks from Ireland, Britain, Canada, Norway, Israel, India, Mexico, and Thailand for paid subscribers.


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Tables Posted

Sun, 2012/03/04 - 2:08pm | Your editor

  I have just posted the Global Investing tables on our site. They can be viewed by those qualified to see them: all visitors can look at our closed positions which show our cumulative performance over several years. Only current subscribers get to see current positions and make money from them. Today I have a money-making idea for the paid subscribers.

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Animal Rights

Fri, 2012/03/02 - 1:09pm | Your editor


Philosophers at Loyola Marymount University in LA believe dolphins and whales have human and civil rights. Its philosophy prof Thomas White argues that because of their intelligence, cetaceans (that's these sea creatures) have the right to freedom from slavery under the 13th amendment. A San Diego CA court must rule on a suit brought on behalf of 5 orcas by People for the Ethical Treatment of Animals. PETA are radicals but most religions argue along with the Catholic Church that humans have a duty to protect what God created against climate change and against brutality to other living creatures.

Meanwhile at the University of Eindhoven in the Netherlands, a scientific team is working on generating enough cow cells in a culture to make an artificial chunk of hamburger. The advantage of test-tube burgers is that they are efficient generators of protein from raw materials, whereas cow stomachs are inefficient and create huge of amounts of air polluting methane. Being made from meat means they still are not allowed to be eaten by Orthodox Jews with cheese. With a nephew who became a vegan after giving up most cheese, made with rennet (a product of calf stomachs and therefore not Kosher) I am pretty clued into the debate. 

Who will raise beef cattle if the scientists succeed?

I contribute these notes to illuminate the gaps in Rick Santorem's claim that Barack Obama's ''phony theology'' was ''putting the Earth before the needs of humans'' and was not based on the Bible.

Another group of anti-greens have taken on Hollywood's plan to produce a film based on Dr. Seuss. ''I am the Lorax; I speak for the trees.'' Actually the Truffula trees which don't exist any more than the mossy Lorax does. 


Britain's Investors Chronicle is predicting a correction on the DJIA based on technical factors. See if they are right. So far it's a red ink day.


More from Ireland, Norway, The Netherlands, Denmark, Germany, France, India, Canada, Brazil, Britain, Israel, and Belgium.

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Violating the Law

Thu, 2012/03/01 - 12:40pm | Your editor

I am violating the law by publishing the following note about one of our shares. The SEC says I am not allowed to tell you about this news from the company lest it be considered an offer to sell, which by the way is ridiculous. The stock fell for a reason and here it is.

Paid subscribers should read on. If they come and take me away I hope all my readers will join Occupy Wall Street

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Fat Fingers Again

Thu, 2012/03/01 - 12:24pm | Your editor

 There was a US flash crash yesterday, not yet in the stock markets, but in T-bills and gold. Once again the algorithms of high-frequency computerized trading ran amok. First over 100,000 Treasury futures were sold, boosting yields on T-bills to 1.99% from 1.93 in a few seconds.

  Then in one minute, starting at 10:48 a.m., $1.8 bn in gold contracts changed hands. The yellow metal wound up the day off $77.10/oz, or 4.3%. Silver plummeted in sympathy, winding up down even more, off 6.9%, despite trading halts. Oil fell over 38% for a few moments. There was heavy selling in metals and currencies.
  Stocks however were not affected.. yet.
  The alleged cause was the ho-hum testimony by Fed Chairman Ben Bernanke, who did not announced another quantitative easing round. To have expected him to would have been silly, and it does not account for the dump. Nor does the Chinese decision to allow banks in Shenzhen, just north of Hong Kong, to offer to move yuan abroad in Chinese currency rather than requiring that they buy foreign exchange. Nor does the rumor that the Chinese shorted a million oz of gold because they need to raise money.
  Some experts believe the sell-off in Treasuries and gold was again triggered by ''fat fingers'', someone inputting numbers wrongly. That is what allegedly happened on May 6, 2010 at 2:45 p.m. when something slashed the Dow-Jones average briefly by 1010 points in few moments, before it closed the day down 600 points.
  This event led to a massive exodus by retail investors from stocks, because they lost confidence in the fairness of markets. The sequel is still harming stock-trading volumes nearly 2 years later. Estimates are that as much as $850 bn in shareholder equity was wiped out in a matter of minutes and nobody can explain how it happened.
Given the recurrent urban myth that banks manipulate the price of gold, I do not think the ''fat fingers'' explanation will hold this time. And it is interesting that in yesterday's stock price reversal there were huge volume increases on the Big Board, perhaps indicating a trend change.
While the current issue of The Economist argues that high-frequency trading like this creates liquidity in the markets and reduces the cost of trading, there are enough examples of subsequent mini-crashes in particular commodity markets to worry experts.
  What is needed is a slowdown in trading, regulations against blasts of market-testing spoof bid and asked price offers, an audit capacity for regulators, greater international cooperation. Or perhaps even a hurdle before algorithms are given a free hand in buying and selling financial instruments.
  The Financial Times' Gillian Tett, favors a ''socio-technical risk analysis'' as proposed in a paper by a former British trader and IT expert, Dave Cliff, and a military IT analyst from Carnegie Mellon University in the USA, Linda Northrup. The paper, published in Britain in Dec., proposes using engineering to anticipate the dangers from complex technology before it is allowed to proliferate robotically, without human oversight. This proliferation creates ''systems of systems'' no human being can understand or control. (Dave Cliff and Linda Northop, The Global Financial Markets: an Ultra-Large-Scale Systems Perspective.)
  My Financial Times was not delivered today so I decided to research the issue on my own. Today Ben Bernanke reports to his other overseers at the Senate. More for paid subscribers follows from Ireland, Scotland, Norway, Denmark, Thailand, Belgium, Canada, Brazil, and Britain. Tomorrow's blog will be late.

Mexican Jumping Bean

Wed, 2012/02/29 - 12:40pm | Your editor

This is a story about a Mexican Jumping Bean which our paid subscribers used to own.

Sometimes you get lucky. I was worried that Desarralladora Homex had risen too fast, and put a sell on the Mexican homebuilder. We had bought late in December and sold Feb. 21 for a 52% gain. Before yesterday's opening it reported a sharp earnings drop and the share plummeted. Net Q4 income (adjusted by non cash, Foreign Exchange effects) came in at Ps 404.1 mn (US$28.9 mn) compared to Ps 500 mn (US$35.8 mn) in Q4 2010.

  Emerging markets are hot as risk-on tempts investors, most of whom, to judge from volume data, are still on the sidelines. Today Citi reported that global emerging market stocks garnered 6 consecutive weeks of rising inflows in the period to Feb. 1. The countries luring the most investors in were China, Hong Kong, and Indonesia, Citi wrote.
Citi also reports that BATS Global Markets, a dark pool, will offer free listings to companies with over 2 mn shares trading daily, in competition with the NYSWE and Nasdaq. Its first signups were 8 BlackRock iShares.
  *More from Indonesia, Belgium, Spain, Poland, Greece, Russia, Norway, Thailand, and Brazil plus a new stock tip.

The Brokerage Customer from Hell

Tue, 2012/02/28 - 1:02pm | Your editor


A public service message:

As a result of going to arbitration last year over a mishandled trade, I had to close my Fidelity brokerage account. I tried moving over to Schwab but they did not let me track some of my shares which they considered immoral or unsuitable.

So I wound up with E-trade. I also had a corporate account for tracking by Covestor clients at Interactive Brokers. A few years ago I had an account with Scottrade. I am the brokerage client from hell. However, I never had an account with TD Ameritrade. So when I got a message marked important today from John Burch, its president sent from I knew better than to log on to ''my'' TD Ameritrade account to read what he had to say.

My TD account does not exist. However, someone who does have an account with TD may well log in and give away his or her data to identity thieves thereby.
  Beware of spoofs. Be very alert to email blasts at this tax reporting season.

I reported the trick to Google which handles our email account and filed a complaint with the US FTC.


More from Australia, Finland, Switzerland, Norway, Spain, and Finland today.

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Oracles and Planets

Mon, 2012/02/27 - 12:54pm | Your editor


The anonymous editor of The Investors Chronicle writes today about a UK firm we used to own, but his message is about Berkshire Hathaway and the Oracle of Omaha:

''Almost to the day one year ago, Tesco gained a new chief executive. Sir Terry Leahy, who had transformed the retailer from a £4bn business to one with a value of £32bn, handed over the reins to his successor Philip Clark.

''As we all now know, Tesco has tripped up badly since that handover of power - ground has been lost to rivals, there's been a shock profit warning and slump in the share price - and the new CEO has admitted to making strategy mistakes.

''Even shareholders who don't own a stake in the giant grocer must be watching intently from the sidelines because at the heart of the story lies an issue that affects all big and successful companies: that of succession planning. No matter how brilliant the CEO, he, or she, isn't going to stay forever. And when the time comes to appoint a new boss, shareholders have to decide if they should throw their lot in with the new boss or get out fast before things go wrong.''

We sold TSCDY after waiting too long but we did sell. We have another British share with a new CEO as well.


Market forecasts are mixed right now, among other reasons because of untried corporate managers wielding new brooms who did not necessarily arrive because of careful succession planning or fear they are coming: at Johnson & Johnson, Vale, Apple, IBM, Dow-Jones, Research in Motion, Hewlett Packard, Maersk, Canadian Pacific, Yahoo, Takeda, Sony, Dendrion, New York Times Co., Veolia, Areva, Olympus.

But uncertainty arises also because of the nearly unprecedented rise in stock prices in barely two months. Are we heading for reversion to the mean, or is this the dawn of a new age? Is it different this time? Or are those the most dangerous words in the English language for stocks?

There are some unique factors. We have had the balmiest winter on the US East Coast that I can remember and Britain has been pretty green and pleasant too. It is a leap year and an election year. The economic recovery has not been hit by a gasoline truck this time because home heating and electricity bills have been moderated by the warm weather and much lower prices for natural gas thanks to fracking. Construction hiring has offset some of the relics of the global financial crisis. (The payroll tax cut is not enough to explain consumer confidence or new hiring; while passed only in a panic, it was a renewal of prior year cuts.)

Is there another factor for optimism this year? My gypsy astrology forecaster cites the presence of Mercury, Venus, and Mars in the sunset sky. But that turns out to be frequent in late winter. In 2004 you could see 5 planets including Saturn and Jupiter.

Today Morgan Stanley issued a bearish forecast calling for underweighting most equities over concern over a recession in Euroland caused by fiscal tightening, limited policy options in the USA, spillover to emerging markets, and other reasons for caution.

MS warns that consensus EPS estimates for a 10% growth in equities this year will stall or fall.


More for paid subscribers follows from Israel, Britain, Finland, Canada, Norway, and Brazil.

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Tables Posted

Sun, 2012/02/26 - 12:47pm | Your editor

Global Investing tables have been posted on our website,

Log in to view the closed positions which are visible to all, or the current holdings positions in closed-end and exchange-traded fund; and in stocks and bonds. Current subscribers only can view the latter two tables.

To view go to the site, log in with your email and passord, and then click the word performance in the third box from the left right under the masthead reading 'Global Investing'. To view it more easily, use the printer-friendly button at the bottom of the tables.

I wrote, wrongly, that Citigroup sold its position in HDFC Bank last week for $1.9 bn. In fact, C sold a stake in Household Development & Finance Corp., a leading and much older Indian mortgage lender, which founded HDFC Bank and uses HDB for fund raising and placing its loan book, but only now owns 23.4%. About a third of HDFC mortgages are based on priority sector advances from the related bank but they are separate companies. Citi of course needs to raise money.. Read more »

The Devil Writes

Fri, 2012/02/24 - 3:19pm | Your editor


Find Satan Speaks can be read online:

More for paid subscribers including a trading alert follows:

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