South of the Border

Tue, 2013/07/16 - 12:12pm | Your editor

China is not the only emerging market to slash available cash for its banks. The same tactic has been used by Brazil and now India. Restricting liquidity aims to burst bubbles before they blow up, and to curb currency speculation--even at the expense of growth.

Governments have long sterilized dollar foreign exchange inflows by keeping them from boosting the local supply of Reais, RMB, rubles, or rupees.

But now they also intervene directly in interbank markets. (I'm not sure about Russia. The only news is Putin in a bathysphere and Snowden stuck in the airport.) The Reserve Bank of India intervened yesterday to put ceilings on the repo market. Brazil's CB intervened to keep the real up. China simply stopped funding the repo market entirely last month.

The BRIC concept is in abeyance now over underperformance by its members. But there is a new emerging market which may do even better than the BRICs in their heighday, Mexico.

Down Mexico way, they arrested the head of the Zeta drug cartel and we will stop emigrants. But that is not what counts. Yesterday Pres. Enrique Peña Nieto announced a NMP 1.3 bn (c$102 mn) program to boost Mexican infrastructure during the remainder of his term.

Local expert Eduardo Garcia writes that with private and JV additions, the total program may mobilize as much as NMP 4 bn ($314 mn), over double what was spent in the previous presidency of Vicente Fox. Its aims: investing to improve rail transport of people and freight, telecoms, marine ports, airports, highways, and roads. Eduardo edits the daily www.sentidocomun.co.mx with which we trade news articles.

On the Bolsa on Monday, the best-known construction stocks all rose, from 0.8% to 3.5%, Eduardo warns. In an area of the Federal District, Texcoco, under Fox's PAN presidency, local activists objecting to land expropriation were bashed by the police who violated their rights. They are a potential political stumbling block to the PRI government plans and its PAN backers. So is Andres Manuel Lopez Obrador, a leftist against the entire government program, who claims that Peña Nieto stole the election with fatcat cash.

Moreover it is unclear to what extent the cost to the government will come from debt or taxes. So how to play it?

The answer plus news from Mongolia to Chile, Canada to Brazil, Jordan to Korea and a few other places follows.

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Phish Attack for Tishu B'Av

Mon, 2013/07/15 - 12:52pm | Your editor

Two cheers. The telephones now work having been reconnected by Verizon which owns the lines late Friday.

Every day another crisis. An outfit claiming to be metooshoes.com sent an e-mail confirmation of an alleged credit card order for $250+ for two pairs of shoes. I then had to call all my credit card companies to make sure that no such charge appeared on my account. I have too many credit cards. The e-mail was a pfishing message I know better than to reply to, but if a transaction by phone or internet was breached I have to make sure that no fake charges get through. They knew my shoe size!

This is all beschert as they say in Yiddish. Tonight begins the Jewish fast of Tisha B'Av, the 9th of Av month, the day when both the Temples in Jerusalem were destroyed, and also the day when World War I broke out (according to the Jewish calendar, in fact copied from the Babylonians.) It uses leap months to keep the lunar and solar cycles aligned. The Prophet Mohammed refused to copy Babylon for his new religion, so Muslims are suffering this year as the fasting month of Ramadan falls in high summer.

Most Jews skip breakfast on the 9th of Av and perhaps read the Book of Lamentations. There will be a blog.

More for paid subscribers from Ireland, Singapore, Britain, Canada, Israel, Japan, Portugal, Brazil, and India.


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Portfolio Tables Posted

Sun, 2013/07/14 - 1:27pm | Your editor

The model portfolios have been posted on www.global-investing.com for viewing. Paid subscribers can sign in and view the current positions in stocks, bonds, and exchange-traded and closed-end funds. Several new subscribers have not yet created their accounts with full addresses, telephone number, and passwords. Please do so by clicking on the button on the upper righthand corner of the website. Without this information you cannot access the website because it is required to prevent directed denial of service attacks on our site.

Everyone with or withoud password can view the closed positions. But of course our current portfolio is what makes money for people subscribing. More for them follows. Read more »

Drug and Plane News

Fri, 2013/07/12 - 12:06pm | Your editor

Reuters reports that France is now proposing less restrictive financial transfer taxes in the hope that these can be applied in all countries in the European Union. Lefty Finance Minister Pierre Moscovici was given the task of proposing the changes to EU rules on a so-called Tobin tax. Currently, France is the only EU country already applying such a tax, put in place in 2012.

Now Moscovici says: "The European Commission's proposal seems to me to be excessive and risks being counterproductive." France, Germany, and 9 other countries support an EU tax but Germany is pulling back, and some other countries with active financial markets like The Netherlands, Britain, and Luxembourg (at least until the government fell) are vigorously opposed.

He added: "I want to work on improving the Commission's proposal so we have a tax that doesn't undermine financing the economy." He also wants the levy to be designed so it will apply in the entire EU. The Commission does not craft laws; it is the creature of the member governments.

There is no mention in Moscovici's published remarks of what will be done about foreign markets (like the US) in improved rules. Currently, the FTT will apply on trades of stock, bonds, and derivatives if the buyer, the seller, the intermediary, or the issuer of the securities is from the EU, even if the trade takes place outside the grouping of countries. Extra-territorial impact would require that US trading of American Depositary Receipts for countries in the EU be subject to the tax.

Today is Day 4 without landline telephones. Promises by our revendor are not fulfilled by the owner of the building lines, Verizon. I never thought I would miss the Ma Bell of my childhood, the now-broken-up AT&T phone monopoly. About 25 of the 140 telephone accounts in this building were affected by flooding of the underground distribution site. Verizon yesterday restored access for its own landlines and Fios fiberoptic lines but not those for other carriers like AT&T, Frontier, or Spectrotel, which I use. I think this is anti-competitive.

More for paid subscribers from China, Switzerland, Finland, Britain, Japan, Mexico, Canada, and India. Bad drug news and good.

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Trading Alert

Thu, 2013/07/11 - 2:14pm | Your editor

Trading alerts are only for paid subscribers. Join them to benefit from our stock picks.

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Mo Yan and Chow Tai Fook: Chinese Lessons

Thu, 2013/07/11 - 1:01pm | Your editor

Two of my cousins have spent their mature years learning Asian languages, Simon with Thai, and John with Chinese. Your editor did not copy John. Many of her childhood friends were Chinese-Americans whose mothers forced them to spend their Saturdays studying Chinese to master 2000 characters and be literate in their ancestral lingo.

I could not possibly compete with a Jong or a Chao, a Lo or Li. Tony (who had a summer job in a Jewish camp) told me that Hebrew School, forced by my parents on me, was a piece of cake compared to Chinese. But I do join the audience at Chinese events at the SUNY China Institute near my home. (SUNY is State University of New York which my taxes help support.)

Last night we saw Red Sorghum there, a movie made about 25 years ago based on the novels of Mo Yan, winner of the Nobel Prize for Literature last year. He was the Chinese Nobelist Beijing liked; the earlier Nobel (Peace) laureate, Liu Xiaobo, is a dissident.

Note however that Mo Yan, a pen-name, means don't speak. When he was growing up during the Mao Tse-Tung famines in the 1950s, when over 45 million Chinese starved to death, his parents warned him not to speak his mind outside the house. For whatever it is worth, your editor spotted several instances of gratuitous socialist propaganda in the movie, but of course I have no idea if this was by Mo Yan or filmmaker Zhang Yimou.

What I did learn from the movie is that Chinese workers can be inspired by a great leader, in this case the heroine, unnamed but nicknamed Nine, to both produce more sorghum wine and to fight off the Japanese invaders. We also learn about how old China forecast Communist China today. There are health plagues (leprosy); corrupt officials ready to cover up a probable murder; food adulteration (urinating into the vats which in the movie makes the wine taste better); and even Nine's one-child family.

But what made me think of all those Chinese-American Saturday students and cousin John was all the dirty language in the film subtitles. It did me no good but they almost certainly do not know these gross words in Chinese.

More for paid subscribers follows from our still telephone-deprived offices. Our output is lower than usual because I cannot confirm news except with slower e-mail and have to rely on official and pr news sites. More for paid subscribers from Finland, India, China, Australia, and Israel. And another tirade about my favorite yield fund.


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Tax Accounting

Wed, 2013/07/10 - 2:51pm | Your editor

Today I correctly calculated our basis for a spun off stock, and its spinner. This is important only to paid subscribers who may be in the same boat. They should log on to www.global-investing.com and view the corrected portfolio table. It is not made available to pre-subscribers.

New subscribers from the offer at stockgumshoe.com should please create an account by clicking the button in the upper right hand corner of the www.global-investing.com welcome page, if they haven't already done so. This will enable us to enter your account which can only be done if we have a street address and telephone number. We do not spam people although of course we do solicit renewals. Getting ID information is how we protect our site against distributed denial of service attacks which try to bring down our site because some companies or countries dislike what we write about them.

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Ding Dong Down and Ulysses

Wed, 2013/07/10 - 11:33am | Your editor

I used to own Alcoa and a few shares remain in our corporate pension plan administered by outside advisor FIC Capital Inc. I owned AA for two reasons. First it was considered a bellwether for the Dow-Jones average, although now we know that aluminum is a special case. And second my Radcliffe College friend, the labor economist Judy Mitchell Guéron, sat on the Alcoa board for over 20 years. Now she has retired.

This year Alcoa again was first past the post with Q2 results, but they were ambiguous. AA beat the carefully managed forecasts from analysts covering it, but still lost money on restructuring and legal costs. The stock has fallen.

Anyone's guess is as good as mine about what this means for US stocks overall.

Today we are suffering from something not experienced in decades, a telephone outage. Our business phone lines are from Spectrotel, a NJ switchless CLEC which leases lines from the majors, in our case Verizon, but each firm has to do its own repairs. Ding dong is down. They will not come until Thursday which I find shockingly bad customer service.

This is one way to avoid the roto-dial calls and the heavy breathing by "Horny" who calls and e-mails from time to time. Any woman running a business with public coordinates is subject to such harassment.

Your editor has contacts, brains, and female intuition with which she picks stocks. And today I even have peace and quiet.

More for paid subscribers follows from Canada, Hong Kong, Britain, Ireland, India, and Israeli and Arab drug companies.

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The French Morsi

Tue, 2013/07/09 - 12:40pm | Your editor

 

A forecast from Nomura's Michael Kurtz out of Hong Kong:

"Rounding the bend into H2, underweight US equity allocation in favour of Japan, Developed Continental Europe, Emerging Asia – where we see varying combinations of more conservative relative valuations and earnings assumptions, substantial equity under-ownership, and greater leverage to the likely pickup in US demand and decline in global risks (intra-European politics and US fiscal uncertainty)."

Nomura's take on Japan:

"A common critique of Japanese stocks we often used to hear was that Japan 'offers too little growth for growth investors, but too little value for value investors.' Arguably, with robust earnings upgrades since late-2012, Japan now offers attractions from both the growth and value perspectives.

"Despite their 63% net local-currency gains since mid-Nov., Japanese equities continue to present substantial value: Japan’s PBV is now at 1.3x, still 10% below its long-term (post-2001) PBV average of 1.5x. This is with a trailing 12-month ROE that, at 6.1%, has recently recovered above its long-term average of 4.9% (improved from c4% a year ago).

"Japan’s forward PER has declined to roughly 14.4x, representing a discount vs its long-term mean of 17.8x.

"The Nikkei’s massive gains of the past 7 months [did not make stock overvalued. They] have merely been reducing deep undervaluation that reflected Japan’s poor economic performance amid the overly tight monetary policy of the past 6 years when other major central banks of the world were loosening with abandon and the BOJ was not.

"Thus it proved no[t] difficult for Japan stocks to engineer a smart 15% locally-denominated rebound since bottoming June 13 (and 7.8% in US dollar terms), making it still the world’s best-performing major market/region in dollar terms since the start of Q2.

"We thus remain Overweight Japan (with a recommended allocation of 11%, vs. Japan’s benchmark weighting of 8.1%), seeing Japan as more a beneficiary of US dollar strength in the face of higher Treasury yields.

"Nomura’s Tokyo-based Japan Strategy team recommends overweight positions in sectors exposed to increased capital expenditure, as well as consumer staples and retail (given that household income should increase in the near future, underpinning a recovery in consumer spending through income effects). And the persistent implementation of BOJ monetary easing keeps us focused on Financials as key beneficiaries."


 

Your editor notes that second acts are now common in US political circles: Gov. Mark Sanford of NC, Anthony Wiener running for Alcalde in my city, Eliot Spitzer seeking to become comptroller. The male sex fiend who is really needed as a comeback kid is Socialist Dominique Strauss-Kahn whose legal troubles led to the victory of François Hollande, a French Mohammed Morsi.

More for paid subscribers follows from Australia, Britain, Canada, India, South Korea, Mongolia, Jordan, Israel, and Singapore. And Japa.

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Oy Canada!

Mon, 2013/07/08 - 12:15pm | Your editor

"For decades, the world has thought of Canada as [our] friendly northern neighbor -- a responsible, earnest, if somewhat boring, land of hockey fans and single-payer health care. It has long played the global Boy Scout, on everything from ozone protection to land-mine eradication to gay rights. The late novelist Douglas Adams quipped that if the United States often behaved like a belligerant teenage boy, Canada was an intelligent woman in her mid-30s. Basically, Canada has been the United States -- not as it is, but as it should be."

Thanks to reader Brad M, so begins a hot insight from the current Foreign Policy magazine by Andrew Nikiforuk, himself a Canadian journalist, about his country:

"But a dark secret lurks in the north. Canada has become an international mining center and a rogue petro-state. No longer America's better half, [it's become] a dystopian vision of the continent's energy-soaked future.

"The good neighbor has banked its economy on the cursed elixir of political dysfunction -- oil. With visions of becoming a global energy superpower, Canada's government has taken up with pipeline evangelists, petroleum bullies, and climate change skeptics. The Boy Scout's not just hooked on junk crude -- he's become a pusher. And that's not the worst of it.

"With oil and gas now accounting for a quarter of its export revenue, Canada has lost its famous politeness. Since the Conservative Party won a majority in Parliament in 2011, the federal government has eviscerated conservationists, indigenous nations, European commissioners, and just about anyone opposing unfettered oil production as unpatriotic radicals. It has muzzled climate change scientists, killed funding for environmental science, and in recent unprecedented omnibus bills, systematically dismantled the country's most significant long-cherished environmental laws.

"The author of this transformation [since 2006] is Prime Minister Stephen Harper, a right-wing policy wonk and evangelical Christian with a power base in Alberta, ground zero of Canada's oil boom. Just as Margaret Thatcher funded her political makeover of Britain on revenue from North Sea oil, Harper intends to methodically rewire the entire Canadian experience with petrodollars sucked from the ground. In the process he has concentrated power in the prime minister's office and reoriented Canada's foreign priorities.

"Shackled to the hubris of a leader who dreams of building a new global energy superpwoer, the Boy Scout is now slave to his own greed."

What the Harper premiership means for our portfolio follows along with news from Canada, Israel, India, Jordan, Britain, Belgium, Australia, Spain, Finland, and Chile. There are some trades.

*We recently sold the railroad specializing in hauling oil to US and Canadian ports, Canadian National Railways, CNI, because railroads are accident-prone. Your editor and our Canada correspondent Martin Ferera think a pipeline is safer. After the horrific accident at Lac Megantic, a small Quebec town near the Maine border, served by a different railroad, Dear President Obama, the case for approving Keystone XL (with route adjustments) is even stronger.

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