Tables Posted

Sun, 2011/08/21 - 5:15pm | Your editor

The tables have been posted, closed positions for all to see, current portfolios only for paid subscribers. View our performance at www.global-investing.com right under the masthead reading Global Investing.

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Financials to Buy

Fri, 2011/08/19 - 11:38am | Your editor

 

Andrew Weiss is someone your editor invests with. The Boston University professor runs one of the top 20 hedge funds by performance in 2008-10 (ranked by Barron's) and the only market neutral one is the listing. My investment is in Brookdale Global Opportunity Fund. Here is part of Andy's latest report to shareholders.

Market participants don't know how their counterparties and other market participants would react to defaults. Consequently, the mere threat of [imminent] massive dautls could cause capital flight out of a wide range of financial instutituions investors believe could be exposed to sovereign debts.

The panic and liquidity crunch from capital flight could be of far greater magnitude than in 2007-8. It is not clear whether the U.S. Congress would allow the Federal Reserve to rescue endangered financial institutions. Indeed, Congress seems to favor legislation that would prevent the [Fed] from stabilizing the economy during a crisis. Blocking peter Diamond's nomination to the {fed] Board of Governors was a significant stemp making the economy more vulnerable to financial crisis and illustrates the dysfunctional state of our political system. A significant number of members of Congress have shown a willingness to destroy the economy if they do not get what they want.

Congress is taking a bizarre approach to our long term problems. The failure of Congress to agree to more spending on infrastructure will likely force state to take up the slack or risk an exodus of local business, thus thratening their solvency. In the long run, the deterioration of our infrastructure is likely to hurt output and, by extension, tax revenues. Bequeathing crumbling roads and bridges to future generations is similar to burdening them with financial debt. Indeed, since the social cost of repais will be higher when there is less slack in the economy, and since borrowing costs are currently exceptionally low, deferring repairs will impose a greater burden on future generations than paying now with bond issues. The threat to the long run [US] solvency is not alleviated by burdening future generations with a dysfunction infrastructure rather than increase debt. We may already being seeing market response to the irresponsible behavior of Congress.

The solution for the Wrong-Way Congress Andy writes about above is an election. The incredibly flaky Republican field may yet make Barack Obama and the Democrats electable.

Andy specialized in development economics for his Stamford PhD intending to work for the World Bank before being so bored that he got excited by applied economic theory and worked on asymmetric information under Michael Spence and Joseph Stiglitz (who both won Nobel Prizes later.) But in his career he specialized in studying emerging markets after all. Spence and Stiglitz have now nominated Andy for membership of the Council on Foreign Relations. I expect to see him more frequently now in NYC.

Who gains from deferred infrastructure investment Andy wrote about? I suppose the same people as get gratification from cutting programs like foods stamps and unemployment insurance. I hope that Pres. Obama and Gov. Cuomo weigh in with a new system for financing roads and bridges through a public-private combo. The shovel-ready stuff done to date was mucked up by bridges to nowhere and corruption, both of which could be stopped by bringing in private money alongside government largesse.

With 135th St. in Manhattan suffering a sinkhole which cut off water and gas to the neighborhood, only a few days after the sewage treatment plant went down a few blocks away, I think my city needs more infrastructure too, even if not bridges and roads. In this case the gas comes from Con Edison which is private but the water and sewage are municipal. I would like to buy a triple tax-free water bond for 135th St., esp. if they can figure out how to create a public-private jv.

 

Being a senior, I think that the global stock market collapse is mainly a non-event. I am not tempted by collecting less than 2% in Treasury yields taxed by the Feds (if not by Albany). But as long as my stocks and corporate and muni bonds pay interest, their rapidly moving and sinking market value is irrelevant.

The real issue discussed below for the paid subscribers is who gains from all that volatility and flight to safety. More news from Britain, Canada, Chile, Brazil, Holland, Israel, India, Australia, Switzerland, and Belgium follows as well. My focus is on non-bank financials but we have a few other ideas as well.

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The Fed When We Need It

Thu, 2011/08/18 - 12:16pm | Your editor

 

from James Kwak, cofounder of TheBaselineScenario:

“Yesterday I wrote an Atlantic column about the bizarre situation that the Federal Reserve is in. Ordinarily, we think central bank independence is important because it permits the bank to take unpopular, anti-growth steps when the political branches of government want popular, pro-growth steps. But today we're in Bizarro world: the political branches are intent on strangling the economy, so the Fed should be ignoring the political winds and stimulating the economy—especially since it's clear that fiscal policy is off the table. Rick Perry just provided a last-minute dose of color.

“Obviously Perry and the Republicans don't want the Fed to stimulate the economy because they don't want the economy to recover before the 2012 elections. But there's something deeper here, which Mike Konczal gets at. Konczal summarizes the 19th-century gold-standard ideology this way: 'Paper money decreases the power of the husband over his wife and the father over his family, loosens the natural leadership that serves as the best protection against “effeminate” manners, and gives us a democracy without nobility.'

“For policy wonks like me, inflation (short of hyperinflation) is just a transfer of wealth from creditors to debtors and hence a way to help bring overleveraged balance sheets under control and get people spending again. Don’t take it from me; take it from Ken Rogoff who is nobody’s idea of a socialist. I think Olivier Blanchard, chief economist of the IMF, has also said that in today’s world inflation should be 4% percent instead of 2%.[ed: oui., cited in the Wall St. Journal, Feb. 12, 2010.Blanchard is a marco-economist on leave from MIT.]

“But for Rick Perry and people like him, there’s something immoral and unmanly about inflation and about paper money. He can stand there telling people that monetary expansion is devaluing the dollars in their pockets, and those people will nod their heads, even though (a) it isn’t—check the inflation figures—and (b) many of them are net debtors and thus stand to gain from a little more inflation.* The basic problem is that Rick Perry and his audience (and probably many other people) see economic questions in primarily moral terms, and in their moral universe gold is better than paper and deflation is better than inflation. (That’s the obvious inference if you say that inflation is bad.)

“The Tea Party, like the old religious right, is a movement based on a sense of moral outrage, and the style of the Tea Party appealed to a certain segment of the population. If you think the world went all wrong in the 1960s and abortion should be illegal and what we need is prayer in public schools, you probably also think the Constitution must be eternally pure and gold is better than paper money—even if it’s not in your own economic interests. (Just like you probably don’t like distributing condoms to teenagers, even if it is an effective way to reduce the number of abortions.)

“And this is why Rick Perry can go around spouting nonsense and still be a serious contender for the presidency.” *(Mr. Kwah has that he is a net creditor owning bonds and TIPS and not a debtor. For the record, I am too.)

More from Finland, Britain, Poland, China, Canada, Australia, Israel, and Germany. And the Fed.

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A Special Solar Report

Thu, 2011/08/18 - 10:23am | Your editor

This special report on our Solar Stock Selection is only for paid subscribers. They don't have to read it unless they want to.

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Trading alert

Wed, 2011/08/17 - 12:29pm | Your editor

Our trading alerts are only for paid subscribers.

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Risky Words

Wed, 2011/08/17 - 11:25am | Your editor

 

I have to start censoring myself and not use "risky words".

Apologies for the late delivery of yesterday's blog. Apparently the problem was that spamblockers activated on sight of the name “Warren Buffett” in my headline. I was talking about a share both the Oracle of Omaha and our readers own. But putting his name in the subject line triggers the anti-spam brigade which blocked our outgoing e-mails.

The same thing happened over incoming e-mails Monday. A patent trial over Viagra was won by Pfizer against a slew of generic drug firms, of which we recommend two. The headline, naturally enough, mentioned the PFE product in the case. It resulted in 18 messages hitting my spam list until I extracted them yesterday. Luckily I had read the news already on Sunday on a foreign website.

The Internet is as stupidly policed as air travel. Surely messages coming from www.global-investing.com or Reuters or Dow-Jones or brokers should not be mistaken for male performance enhancing drug solicitations.

Checking in on our flight to Provincetown in Boston, my husband set off the alarm and then was told to remove his wrist watch and go to a booth for an electronic check. He was cleared but then a very fat female DHS officer said he would have to be patted down despite the machine having concluded that apart from his watch he had no suspicious body areas.

He became indignant. The officer threatened to ban him from our flight.

So I said very loudly to them both: “The patdown is illogical but people who have power over you are allowed to be illogical.” The fat female nodded and smiled in agreement despite having been insulted. Luckily the patdown was done by a man not by her.

Today we have some good news and some bad news from Australia to Colombia, Britain to Finland, Switzerland to Israel, Poland to Korea.

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Trading Alert

Tue, 2011/08/16 - 1:37pm | Your editor

Trading alerts are only for paid subscribers. Join them. Your portfolio will gain.

When you try to get a good entry price for a foreign stock, three things must align. The company must have some sort of edge: growth or value, sector or safety. Then too, you have to look at the mood of the markets, which increasingly are correlated globally. And finally, you have to consider the exchange rate of the currency of the home market which is the source of most pricing for stocks even if they trade as American Depositary Receipts.

I have been waiting a few days to get the line-up I want and today it looks like we want to buy a share I am writing up below, for paid subscribers. The stars have aligned.

 

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Warren Buffett and Me Have Something In Common

Tue, 2011/08/16 - 11:32am | Your editor

 

Only one of our stocks made the worst performing list last week according to Monday's Financial Times listing (of the top 1000 global shares) and was down 12.5%. Warren Buffett owns it too. If he sells it will reduce his tax bill which he apparently wants to raise. I made a mistake in the earned and unearned income levels at which the Oracle of Omaha wants there to be higher tax rates. It is $1 mn and $10 mn. I wrote $ 1 mn and $100 mn. George Soros agrees with Buffett that taxes should be more progressive.

Personally, I think the whole tax code should be scrapped along with all the negative taxes for things like paying mortgages, and replaced with a simple set of 4 tax levels based on earnings (including unearned earnings). I am not sure if you should be able to deduct state and local taxes. Social Security and Medicare should be in a separate box (to show they are insurance) but certainly there should be no cap on contributions. This would mean my accountant and Michele Bachman need to find a different line of work.

 

When you try to get a good entry price for a foreign stock, three things must align. The company must have some sort of edge: growth or value, sector or safety. Then too, you have to look at the mood of the markets, which increasingly are correlated globally. And finally, you have to consider the exchange rate of the currency of the home market which is the source of most pricing for stocks even if they trade as American Depositary Receipts.

I have been waiting a few days to get the line-up I want and today it looks like we want to buy a share I am writing up below, for paid subscribers. The stars have aligned.

 

More from Switzerland, Korea, Finland, Canada, Brazil, India, China, and Britain below. As well as an update on one of our funds and a new stock tip.

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Unless the Sky Falls, Look to M&A

Mon, 2011/08/15 - 11:05am | Your editor

 

Your editor is back in the saddle again. As forecast yesterday to paid subscribers based on Tel Aviv Sunday trading, the European, British, and USA markets are coming out of their funk. With impeccably poor timing, the head of the World Bank, John Zoellick, warned in Australia that the world is facing a second economic downturn.

Warren Buffett in today's New York Times calls for greater income tax progressivity to help balance the US budget. He wants those with $1 mn in annual earnings (from wages, capital gains, and dividends) to pay more than their secretaries, and for those with over $100 mn to pay more still. Being rather on the old side, Buffett recalls how in the years when he was making his fortune, he was not dissuaded by the very high tax rates which hit him. It has become a Tea and Republican Party shibboleth that any taxation reduces entrepreneurship and private sector job creation.

Of course this is nonsense: people become billionaires because they enjoy investing, not because they get to keep more of its fruits. And cutting benefits to the poor and aged, however undeserving, will cause the economy to stagnate further. Buffett can afford discretionary spending while an unemployed unmarried mother has to feed her offspring.

More for paid subscribers from Israel, Britain, Canada, Switzerland, Norway, Finland, Singapore, Australia, Thailand, Greece, and India.

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Charts posted

Sun, 2011/08/14 - 3:58pm | Your editor

Our charts have just been posted, the closed positions one for public viewing, and the other two, of current holdings, only for the subscribers.

We have several new subscribers and pre-subscribers who came on board in the stock market panic. Marketing manager Gerry cannot explain why. Here is some information for them. The weekly charts you are allowed to see are on the www.global-investing.com website right under the masthead which says (in golden letters) Global Investing. Sign in first if you paid. If the charts do not format properly on your screen hit printer-friendly format. This also helps print the charts on normal paper.

Considering the wild week we just had, I'm glad I was a good distance away from Wall Street on Cape Cod. I flew back to NYC from Provincetown via Boston with Cape Air and Jetblue Friday afternoon (maily to beat the Saturday turnover crowd). This cost roughly the same amount as to cross the Atlantic, although the journeys were shorter and I suffered no jet lag. The Cape weather was good but it is pouring in NYC today. 

A note for paid subscribers follows:

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