Tables Posted

Sun, 2012/12/09 - 1:01pm | Your editor

What with Macabees and MacAfee, I managed to post my latest tables on the website.

Please visit to see the tables you are allowed to view, and remember that you can click for a "printer friendly" version.

The big innovation is that I have included a new index of dividends for our speculative portfolio, since some of these holdings do make a payment.

More for paid subscribers follows about data.

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Forget the Aztec Calendar

Fri, 2012/12/07 - 1:30pm | Your editor

Forget the new year; forget the new Aztec calendar cycle to take place Dec. 21. And forget the narco-gangsters and their murderous drug wars, which curse only few border areas.

The big change in Mexico is coming from its political good sense and its economic advantages.

Mexico's new government is tackling its sacred cows which have controlled the pasture despite the North American Free Trade Agreement. The reform measures have garnered support from most of the political class. Read more »

Mom & Pop in India

Thu, 2012/12/06 - 1:39pm | Your editor

Abhimanyu Sisodia writes from India:

Retail foreign investment has just been authorized thanks to a Congress Party parliamentary manoeuver to by-pass the populist right whose MP's recalled that the East India Company had 'come as traders and became rajahs'.

This is good for India because each $1.7 bn of investment in retail creates $1 bn of gross domestic product. GDP has been flagging badly and Credit Suisse cut FY2013 growth forecasts to a mere 5.9% recently. After the vote, Goldman Sachs raised its 2014 growth forecast to a much more encouraging 7.2%.

The vote is being seen as a 'welcome' sign for foreign investors who will expand their India retail market to over $700 bn by 2017. The rupee has already started gaining, and an improving balance of payment with the rupee near the low end of its range will add to growth. (This is bad for me because I get paid in dollars but I can take one for the team.)

Your president also featured in the debates, cited by the opposition: 'Pres. Obama is campaign[ing] to encourage Americans to shop at small business establishments' and is a 'mom-and-pop store champion'.

The real problem is how to invest in ADRs to gain. (Ed: For non-resident Indians who can buy in Mumbai, he has lots of ideas, but that doesn't help most of our readership. Vivian has thought of a way for paid subscribers. More from India, Israel, Canada, Bermuda, Singapore, Japan, and Rochester NY.

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Tony Blair and the Rabbi

Wed, 2012/12/05 - 1:38pm | Your editor

Ex-British PM Tony Blair last night held a conversation with Rabbi Peter Rubinstein at Central Synagogue in NYC in which he “awed” the rabbi with his optimism. Mr. Blair is now negotiating in the Middle East for the Quartet (the US, the EU, the UN, and Russia.) Among his reasons for optimism is the offshore Gaza gasfield potential, with a large find “which could lead to a new economic reality next door to Israel.”

Prompted by the rabbi, and building on his experience crafting peace in Northern Ireland, Mr. Blair outlined how “5 wise Israelis and 5 wise Palestinians” could create “the basic shape of a settlement” based on the Olmert-Arafat deal which nearly worked.

This he thinks possible despite new developments since the last round of talks, like the Arab Spring and new rockets in Gaza and Lebanon which can reach Israeli cities, and a weakening of the Israeli left after the second Intifada and the Gaza turn to Hamas. However, “time is running out,” he warned. Read more »

We've Owned It Since Breakfast

Tue, 2012/12/04 - 1:02pm | Your editor

Here from Hulbert Financial Digest are the latest data on our performance:


Performance Summary (annualized)

Raw returns


Wilshire 5000













Sharpe Ratio


Wilshire 5000













* Performance divided by risk; a higher number is preferable


There is a problem with the numbers which show that is beating the Wilshire 5000 this year. We generated those high results by what, for us, is excessive trading, by selling some of our long-time big winners to reduce our basis for capital gains taxation going forward. As a US taxpayer, I want to take my gains taxed at 15% this year rather than waiting until the bite is bigger next year. In previous years, I tended to simply let my profits run.

This is a cartoon caption from from Hugh Young, equity strategist at fund manager Aberdeen, quoting a hypothetical asset manager: "We believe in the value of long-term investments. For example, we've been involved with this company since well before lunch, and we'll hold it until at least the end of next week." Neither Mr. Young nor Ms. Lewis really agree.


While Carson Block, the short-seller calling himself “Muddy Waters” has shifted his attentions away from China, he and his colleague “Citron Research” have succeeded in getting our SEC to intervene against 5 major accounting firms for failing to document their audits of Chinese firms whose stocks trade in the US. The Chinese government recently blocked auditors from sharing paperwork with foreign stock regulators, why Block decided to short stocks elsewhere, like in Singapore, against trading house Olam.

But the SEC has taken up the cause, investigating the auditors for failing to provide documentation on their audits. It charges that they are failing to comply with information requests by the SEC over “potential accounting fraud against US investors,” despite the requirements of the SEC Act and the Sarbanes-Oxley Law.

The auditors are the parents of the China offices of Deloitte Touche, Ernst & Young, KPMG, PriceWaterhouse Cooper, and BDO. E&Y separately is facing sanctions in Canada for failing to correctly confirm the financial statements of Sino-Forest, a sham Chinese firm listed in Toronto, which later went bankrupt. We sold our entire directly held Chinese small cap portfolio last summer because our reporter, contrary to her own interest in continuing to file on these stocks, told us there were issues over accounting and the companies required a level of on-the-ground scrutiny she could not provide.

I sometimes regret this whenever the shares bounce up, but we found an alternative way into China for our readers.


More for paid subscribers follows from Sweden, China, India, Finland, Canada, Mexico, Israel, Miami, The Netherlands, and California.

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Corrected Closed Positions Table Posted

Mon, 2012/12/03 - 4:27pm | Your editor

I just fought my computer program to impose a tighter format and updated my mistake in the closed-positions table posted yesterday. To view it more easily, use the "printer-friendly" button.

The Bear Missed the Train

Mon, 2012/12/03 - 2:08pm | Your editor

Casa Saba rose 12% in the past week in Mexican trading and by a third in US trading before the American Depositary Receipts program ended. The two prices fell out of alignment as US small shareholders sold in a panic. Meanwhile institutional investors able to transform their ADRs into Mexican shares were making out like bandits, buying the ADRs, paying the fees, and then converting them. The “favorable arbitrage” gave the big players an edge. ADRs are supposed to help individual investors diversify globally.

Where is the SEC when we need it?


From an Australian working for a Japanese bank in Hong Kong, a riff on Gene Shepherd's WOR NYC radio parody of the sentimental Yiddish song, “Bei Mir Bist Du Shayn”:

The bear missed the train.

The bear missed the train.

The bear missed the train.

And now he's walking.

Michael Kurtz of Nomura Capital writes his outlook for 2013 and offered a bonus for those recognizing the source of his title, “The Bear Missed the Train”, whose subject is the danger of “excessive risk avoidance”. The paper is mostly about allocation.

The bear's “demonstrated survival trait over the past several tumultuous years”, Kurtz calls “a handicap now that US and Chinese demand are picking up, uncertain political transitions in both countries are largely complete, the ECB has built a substantial backstop against ‘fat-tail’ eruptions, and deliberately inflationary policies are winning against more fearsome deflationary dangers.”

Instead, Nomura says to go in for “opportunistic risk management” as “global growth is on the mend”. Specifically, he says that “cross-border capital inflows into non-dollar markets have significant scope to intensify in 2013” fed by a rise in “global demand pickup” and QE3. Funding the flows is a reservoir, the “shift out of low-yielding US Treasury bonds.”

Kurtz expects the MSCI World price earnings ratio, now 11.7%, to rise by 50% to 17.5x earnings and support a higher MSCI level in 2013.

The Nomura team allocation and stock tips for the New Year focus on recovery in global demand, via plays on US housing, capital spending by companies, or reflation. Here are the specifics:

  • “Underweight US stocks as a reversal of past ‘safe-haven’ dollar inflows is likely to continue in the months ahead. US margin and earnings assumptions strike us as ambitious in any case, although S&P 500 multiples are still unchallenging;

  • “Overweight DM Europe (ex-UK) as substantial policy-driven stabilization in sovereign debt and financial conditions should allow a reduction in still-elevated equity risk premia. But we downgrade the UK to neutral, where, unlike the Continent, prospects for policy-driven re-rating are more limited;

  • “Upgrade Japan to overweight on rising prospects for a very equity-friendly reflationary change in monetary/FX policy following December general elections and new BOJ senior appointments in March-April;

  • “Stay Overweight Emerging Markets – primarily via emerging Asia, now the best-performing global region YTD – amid rising foreign inflows and strengthening Chinese demand.”

Nomura's main objection to Britain is fear of higher labor costs, and it favors some of the Euro-periphery countries because their labor costs have been sharply slashed. By sector, Nomura in Europe overweights basic industries, energy, financials, media, and technology while underweighting healthcare, consumer cyclical and staple goods, and capital goods. It favors Russia because of the oil price outlook despite “long-term strategic challenges.”

It overweights Japan after a rather uninspiring 2012 and below-benchmark foreign inflow there and not much exposure even by domestic institutions to equities. Next year will see a “rotational” panic to buy. But in its major market, Nomura withheld specific sectoral advice for now except for calling for “sustained equity out-performance” in 2013. However it favors Kubota as a play on the improving housing market.

For the Pacific Rim overall, including Australia, while saying “the clouds are lifting, Nomura posts yellow flags, warning of overheating and inflation, especially in H2. So what you are supposed to do is watch out for inflation while taking advantage of relatively modest valuation levels in H1, and then exit before the reversal. Higher Asian multiples will lure in instituions and enhance liquidity. The favorite markets are China, Korea, Taiwan, Hong Kong, and Thailand, with underweights for Oz, India, Malaysia, Indonesia, and The Philippines. By sector Nomura likes financials, IT, industrials, consumer discretionary, and energy. It underweights Asian consumer staples, utes, and healthcare.

While noting that 2013 forecasts for Latin America are too pessimistic, it agrees with the consensus that Brazilian earnings will remain flat or fall because of continued soft Chinese commodity demand. However Nomura also says that the situation may reverse if Chinese growth resumes, and you could see much faster growth in Brazilian eps next year if Chinese demand picks up.

Overall, Nomura likes Mexico better because it can more confidently forecast growth there, based on what is happening in its northern neighbor.

After the Nomura report, the last Chinese purchasing managers index came in at 50.5. An index number over 50 marks a pickup in spending, the first time in months this has been reported.

Oops. A corrected version of my 2012 gains will be posted later today. My fat fingers used the Nov. 19 gains for Dec. 3. More for paid subscribers from Asia and the Pacific Rim, Latin America, Europe, and the Middle East.

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Tables Posted

Sun, 2012/12/02 - 2:13pm | Your editor

The new tables have been posted on our website. Pre-subscribers can view the closed-positions table; paid subscribers have access to all three tables. Remember that you can make them easier to see by using the "printer-friendly" button.

Please continue to vote for to be given the STAR Award for the best blog at The contest runs until Jan. 31 and you can vote daily. You also have a chance at $10,000 of free investment material in their raffle.

More for paid subscribers follows:

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Gold in Them Thar Pills?

Fri, 2012/11/30 - 1:09pm | Your editor

If he were running for Premier in Israel, Barack Obama would win the election.

After the latest Gaza Strip fighting, only 36% of Israelis think their country is better off than it was before it; a majority say Israel is either about the same (38%) or worse off (21%), according to a new University of Maryland poll. A similar split is over who “won”: 40% think Israel did, but 45% said nobody won and 11% said Hamas won. "Clearly most Israelis are not feeling victorious," said Shibley Telhami, a lead poll investigator.

Among Israelis, 60% now have a positive view of Pres. Obama, up from 54% over the past year. He is identified as the most admired leaders by more Israeli Jews than any other, including Binyamin Netanyahu.

Twice as many Israelis think US public support for Israel's security needs is growing than think it is receding, 40% vs 21%.
Israelis continue to believe Iran is developing nuclear weapons, but support for an Israeli attack on Iranian nuclear facilities is only at 38%, while 50% are opposed. And fewer than half of those who favor an attack want to proceed even without US support, a mere 18%.
These findings came from a poll by the Anwar Sadat Chair for Peace and Development at the University of Maryland and the Program on International Policy Attitudes, directed by U. Md. Prof Shibley Telhami and Steven Kull, PIPA's director.


Infosys, the Indian IT firm, is moving its US listing from Nasdaq to the NYSE


The tumbrils are beginning to roll again in Paris, and Mme Defarge has taken out her knitting needles. The sans-culottes are on the rise.

Tomorrow France begins the first of its offensives against foreign stockholders in its companies. Any American Depositary Receipt or French ordinary stock trade is subject to a tax at 0.20% of the total transaction cost. US brokerages will collect the tax for the French.

The only way to avoid it, ironically enough, is by day-trading, buying and selling the same share within a market day.

Still to come is another anti-bourse measure, a tax on French-incorporated companies which declare dividends. It is not a tax paid by the shareholder, but by the company, so it cannot be reclaimed against US taxes. We sold down all our French holdings in preparation for these extremist Socialist measures.

Other measures are in preparation including bans on proprietary and high-frequency trading by banks. Hedging is going to be outlawed by banks and brokers, insurers and providers of retail credit. And meanwhile the tax on France's richest citizens who live in the country has risen to 75% of earnings, driving away corporate magnates and Gerard Depardieu, most of whom movedover the border in Wallonia, Belgium. (Unlike the USA, France does not tax its citizens living outside the country.)


Thanks for all the support I received for my note on inequality as measured by the Gini coefficient yesterday. One excited Brooklyn reader compared me to Warren Buffett because I can keep my political views separate from my immediate financial advantage. I have never been bracketed with Buffett before. And because Tea Party types already canceled their subscriptions, nobody did (so far) this time, maybe because they self-expelled themselves from Global Investing.

Many readers had technical questions about how the index is tallied. The earnings data do not look at anything except deductions for taxes and other things (like pensions) taken from earnings, not on the cost of money, or sales or inheritance taxes. Capital gains are not included but dividends and interest are. It is hard to generate Gini coefficients which apply across US state borders to say nothing of global ones. So they try to keep things simple. It is, like any other statistic, an approximation.


More from Canada, Brazil, Singapore, Israel, India, Britain, Thailand, and Ireland.

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The Gini Coefficient

Thu, 2012/11/29 - 2:42pm | Your editor

I will probably offend many of you by arguing that eventually balancing the US budget is not the only reason why taxes should be raised on the rich. The other reason is heretical: to remove great disparities in income and assets between the ultra-rich and the average American.

Inequality is not the American way. Upstairs Downstairs is a mark of a hierarchical societies, like Britain, not of the wide open spaces of the USA. Historically, our country last saw extremes of wealth and poverty at the tail-end of the 19th century and early years of the 20th, with tenements for the poor working in sweatshops, and fabulous wealth for moguls who lived in Newport (RI) in summer “cottages” that Louis XIV would have found excessive.

The New Deal did not only foster a recovery from the Great Depression. It deliberately aimed at removing the huge differences in wealth between the 1% and the rest via taxation and social programs. The wealthiest called Franklin Roosevelt “a traitor to his class” but it can be argued that his policies saved the US from extremism of the Left and the Right which derailed other countries at that time. Without policies which reduced inequality, the US might have spun left like Russia, France, or Britain, or right like Nazi Germany, or Fascist Italy, Spain, Portugal, and Japan.

Incomes in the US were among the world's most egalitarian until about 1980. Since then, mainly because of changes in the tax code and the rise of rent-seeking in the financial sector, ours is the developed industrial country where equality has declined the most.

The Gini coefficient is a globally accepted numerical indicator of inequality, with 0 representing perfect equality (everyone's income is the same) and 100 standing for total inequality (where one person owns everything.) An Italian, Corrado Gini, invented this metric exactly 100 years ago. In 1980 the US Gini coefficient was just over 40; it was still under 41 in 1997. But more recently, in 2008, the level has been at 45. (The data are published by the CIA.)

There are many causes. One is the change in the tax laws. The income of the wealthiest 20% of Americans rose 14% in the 1970s while the poorest fifth's share rose only 9%.

But in the 1990s the top 20% gained 27% in income while the poor fifth only gained 10% which widened the income spread because of the Bush II tax cuts.

An academic expert, Robert Gordon at Northwestern University says that the bottom 99% of the US population has not seen any rise in inequality since 1993. The whole shift has been among “the 1%.” Another study, by economists Emmanuel Saez and Thomas Piketty, compared the super-rich today with the Astors and Vanderbilts of the 1890s.

They wrote that  the top 0.1% of the US population in 2006 earned about 8% of the total income in the USA, roughly the same as during the gilded era. They only earned 2% of the total in the 1960s.

Another study by the Economic Policy Institute worked out that the top 1% of Americans earned 10x as much as the rest of us in 1980 and 20x as much in 2006. And the top 0.1% of the total earned 20x as much as the rest of us in 1980 and this soared to 80x as much in 2006.

These figures would be even more disparate if capital gains were included, as they are not. As we all know, capital gains were taxed at a much lower rate lately than in the past. Making matters worse is the stagnation and decline in income for the lowest two sections of Americans, the bottom 40%, during the global financial crisis, which is known. However the Gini numbers are not yet in.

The US Gini index is 45. Other countries which are similarly unequal are Mexico, Communist China (at 41.5), and Argentina. Countries more unequal are in South America (led by Brazil, which however is more equal than it used to be) and the Caribbean, where the worst off is Haiti. Other more inegalitarian countries are South Africa, Namibia, Lesotho, The Gambia, Sierra Leone, Zimbabwe, Madagascar, Niger, and Burkina Fasso and other paragons. Elsewhere Nepal, Indonesia, Albania, and a few other kleptocracies are the only more unequal European and Asian countries than today's USA. What a group to belong to!

Extremes of inequality are bad for stability and national unity. They are also bad for economic growth. I know I sound like I don't believe in rewarding hard work by citing these figures. But can you truly say that the top 0.1% of Americans worked 80 times as hard as the rest of our country in 2006?


Oops. Apologies to City of London Asset Management head Barry Olliff whose name I misspelled in yesterday's blog. Apologies also to Andy Weiss whose firm's compliance officer says I am no longer allowed to quote him or name his firm in print; my assumption has always been that the First Amendment trumps SEC regulation, among other things allowing this blog to recommend stocks. And of course I would not quote Andy without giving his bona fides so people know why it matters what he says.


More for paid subscribers from Spain, Canada, Israel, Thailand, Switzerland, Norway, and Singapore. We have a new stock pick today.

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