New Year Wishes

Wed, 2013/09/04 - 12:33pm | Your editor

Today is the last working day of this shortened week. To all my readers, of whatever religion, a very happy Jewish New Year. Stock markets, after the big news of yesterday, will be sedate over the two-day holiday, and not just in Tel Aviv which is closed.

Particular good wishes for the 5774 New Year to Heather, Jean, and Heinrich, three Protestants who sent me l'Shana Tova greetings.

Blog-writer (and nuclear physicist) Nigam Arora of The Arora Report notes that India is the 10th largest economy based on market exchange rates but the third largest based on purchasing power parity. He cites some of the problems in his homeland:

"*India has a gold problem. Hording [sic] of gold by the mases takes away money from more productive endeavours and has a negative impact on foreign-currency reserves;

"*India has a currency problem. The rupee keeps on weakening due to a high current-account deficit, the difference between imports and exports;

"*India has an oil problem [as] a large importer;

"*India has a Pakistan problem. Pakistan is plagued by terrorism and instability. India is a prime target of Pakistani jihadis."

But he concludes: "The Indian market is near its recent low. The catalyst for recovery is the upcoming general elections."

More for paid subscribers follows from Canada, Russia, Finland, South Korea, Brazil, Ireland, and Britain. And a note about bonds.


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The Taperer

Tue, 2013/09/03 - 11:45am | Your editor

Over the holiday weekend I visited CB2, a household goods shop in my neighborhood. They were offering a device to trim your candle bottoms to fit into your candlesticks. It is a taper taperer. This shade of Edna St. Vincent Millay is what the Fed needs! Especially if it picks Larry Summers over Janet Yellen, who like Millay was once a Brooklyn girl.

With that feeble joke we hit a heavy news day, with no fewer than four of our positions in play because of big deals. More for paid subscribers follows:

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Oops

Sun, 2013/09/01 - 3:18pm | Your editor

Sunday newsletter with tables has been corrected. I averaged UP not DOWN which one is not supposed to do in the newsletter business.

Model Portfolios Posted

Sun, 2013/09/01 - 12:05pm | Your editor

As is my Sunday tradition, I have just posted the model portfolios on our website, www.global-investing.com, and as is also my Sunday tradition we are now off to brunch on dimsum. New readers should be aware that the spreadsheets are easier to view using the "printer-friendly" button, even if they are not intending to print the tables.

Full subscribers get to see all three tables while pre-subscribers may only view the closed-positions (to see what they are missing). More for the paid contingent follows.

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On Syria

Fri, 2013/08/30 - 11:44am | Your editor

Prussian general Carl von Clausewitz wrote: "War is a continuation of politics by other means." Perhaps we should try politics before other means. Since two Security Council countries support Assad, they could try to initiate peace negotiations.

 

Pres. Obama told the Nobel Peace Prize presenters in Norway that "force is sometimes necessary" because "evil does exist in the world." He argued that non-violence would not have halted Hitler's armies. "It was not just international insitutions, not just treaties and declarations, that brought stability to a post-World War II world. Whatever mistakes we have made, the United States of America has helpd underwrite global security for more than six decades with the blood of our citizens and the strength of our arms."

He then cited law and philosophy about a "just war", which must meet certain preconditions: "if it is waged as a last resort or in self-defense, if the force used is proportional, and if, whenever possible, civilians are spared from violence".

Obama noted that "wars between nations have increasingly given way to wars within nations."  "In today's wars, many more civilians are killed than soldiers, the seeds of future conflict are sown, economics are wrecked, civil societies torn assunder, refugees amassed, and children scarred," the Nobel Peace prize-winner president asserted.

 

Is a war over Syrian chemical weapons (used by whichever side) "necessary" or "just"?

Can short-term "surgical" unmanned missile strikes make any difference in this conflict between two armies of nasties, the Bashar al-Assad regime, and the Al Qaeda-infiltrated opposition?

Will making war over the latest users of outlawed chemical weapons stop cuurent a future use of poison gas?

What about mission creep? can the US attackers extract themselves from the conflict when and at the terms they choose?

Will those missiles only strike bad guys and not their victims (the marginally better guys)? Won't some fall on innocent civilians, or embedded press, or even UN reps?

What about blame and propaganda Moslem demonizing non-Moslem war-makers regardless of who did what to whom?

Such concerns led the British House of Commons, the Mother of Parliaments, yesterday night to vote against military action in Syria.

 

Seamus Heaney who just died was briefly our landlord when, living in France, we were unable to get a hotel room to attend our daughter's Harvard graduation. She was attached to Adams House where the Northern Irish poet was in residence.

 

There will be no blog Monday, Labor Day in the USA. There will be no blog Thursday and Friday because of the Jewish New Year. Today's news is from Mexico, Brazil, Chile, Spain, Germany, The Netherlands, Canada, Indonesia, and Finland. There is a sell.

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Reflexivity Risks

Thu, 2013/08/29 - 12:17pm | Your editor

 

Frequent contributor Michael Kurtz writes about the Asian market outlook today from Nomura in Hong Kong. My interest was piqued because Michael adopts the George Soros concept of 'reflexivity'. Read on:

"The analytical purist in us wants to interpret Southeast Asia’s and India’s recent equity pullbacks as discounting – foretelling abrupt growth slowdown. But in actuality, the volatility that has seized several Asia-Pacific markets this month strikes us as something less forward-looking – and less ominous.

"With [a] growth expectation-driven rise in US Treasury yields, carry-trade-funded positions in non-US dollar markets (not just Asian) have reverse[d]; and external funding for current account deficits has grown more dear. This unwinding applied more to local fixed income than to equities; but when such outflows also put pressure on local currencies, stocks lose attraction by association. So the equity pullbacks strike us as more 'pure' position-unwinding than a discounting of future expectations.

"One feature of the choppy market of the past 3 months is that a strengthening global recovery is itself underpinning the expected Fed policy normalization and yield curve steepening that triggered the disorder. [Purchasing Manager Indexes] in the US, Europe, and even China all look more vigorous lately; and Japan’s revival appears real. Europe is exiting recession [which will produce] stronger corporate earnings. Asia remains well-levered to recovering Developed Market demand.

"Lost amid all the recent hair-pulling: low-beta defensive sectors have been the worst performers while cyclical sectors have done best.

"A key question for Asia’s currency-handicapped equity markets now will be one of reflexivity, to what degree the side effects of the unwinding – cost-push inflation through weaker exchange rates, tighter funding, encroaching fiscal strictures – refract adversely back into local growth or earnings. Those risks come on the radar screen, but only for Indonesia, India, Malaysia, Thailand and the Philippines, [after]currency declines. Those markets make up less than 15% of Asia-Pacific ex-Japan market capitalitalization.

"For much of the rest of Asia – export-intensive, non-external account-challenged economies such as Korea, Taiwan and China – the key variable remains not higher Treasury yields, but strengthening global demand that has usher[ed] yields higher. It is these markets, plus Singapore, that [are] our recommended Asia-Pacific ex-Japan country overweights. India and Southeast Asia [are] not yet cheap enough to compensate investors through earnings yield for their now riskier fundamentals."

 

My quotation from Henry Kissinger yesterday was picked up and recommended by a website called beforeitsnews.com (without permission of course). The site specializes in alternative medicine miracle cures, spirituality, and UFOs. As a result I received messages from weirdos including an Tea-Party-like outfit called letfreedomring.com which wrote:

"It would be counter to our interests [meaning the people of the US], to believe anything the Israeli's [sic] have to say in this regard since they have a vested interest in war with Syria. Not to mention their plan for expansion which includes 3/4 of Syrian territory. They have already 'given' oil rights in Syria which explains a lot.

"Since only Congress can declare war, I have to trust the majority of them to actually represent the people, though this has proven not to be true in less dire circumstances."

The message was not signed so I have no idea who I might be in the last paragraph. Ai, the Internet!

 

More for paid subscribers including a lousy quarterly report, from Singapore, India, Chile, Britain, Canada, Germany, and a few other places follows:

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Quoting Kissinger

Wed, 2013/08/28 - 11:53am | Your editor

To quote Henry Kissinger's remarks about the Iran-Iraq War about the Syrian crisis: "it's a pity they cannot both lose."

On the one side we have the murderous doctor, Bashar al-Assad, a modern Mengele, killing innocent Syrians with outlawed poison gas attacks to perpetrate his minority Alawite Shia regime, which moreover is backed by Iran and Hizbollah.

Opposing Assad is a Sunni rebellion increasingly fed by global volunteers, many Al Qaeda and Salafi activists seeking new fields to conquer. Both sides are murderers.

A full-scale boots-on-the-ground intervention by Arab or Western powers probably can't happen. First the USA lacks the political will for another round of Middle East war. And there is no way a UN vote can legalize it. So the preferred Kissinger outcome is likely.

The UN acknowledges evidence that a "chemical substance" killed people in the Damascus suburbs, according to its Syria envoy Lakhdar Brahimi, which may have killed "more than 1000 people." This "was of course unacceptable... outrageous... dangerous" according to his remarks to the press in Geneva. He didn't say if the evidence he was citing came from the UN team or Western intelligence, but he did uphold the bureaucracy from which he springs. Any military action must be approved by the UN Security Council, he explained.

And of course the Security Council premanent 5 include Russia and China which have veto power and support Assad.

Another source of evidence that the Assad regime used chemical weapons, according to Focus, a German magazine, was Israeli Defense Forces' Unit 8200 tapping conversations between Syrian officials agreeing to use gas.

Iranian Assad-backers have already vowed vengeance on the IDF electronic surveillance unit, resulting in Israelis lining up to get fitted with gas masks.

Vengeance against the US even before any decision came from a shutdown of The New York Times website, the second this month, claimed by the Syrian Electronic Army.

Readers have only a few more days to sign up for Kathleen Peddicord's conference in San Antonio about retiring overseas. Visit http://www.liveandinvestoverseas.com/cmd.php?ad=644519 to learn more.


 

More follows for paid subscribers including corporate earnings reports, from Israel, Ireland, Britain, Finland, Brazil, Russia, Colombia, and Sweden.


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The Guns of August

Tue, 2013/08/27 - 11:36am | Your editor

The guns of August are being readied offshore Syria. We are better prepared to deal with the economic consequences now than in 1914, at the outbreak of World War I. Then the US banking system could have been drained of both currency and gold fleeing to Europe. The exchange rate for the dollar fell creating a potential profit for Britons converting US assets into the yellow metal.

And the Fed, barely 7 months old, did nothing.

So the Woodrow Wilson administration took the initiative. By US Treasury order, the New York Stock Exchange was closed for 4 months to stop European investors selling US securities for gold. (Foreigners owned US shares worth more than $4 bn, a big sum then, mostly invested in railroads.)

Then using an old law called Aldrich-Vreeland, Treasury Secy William McAdoo allowed banks to issue unsecured US dollar banknotes without depositing government bonds to back them. He also authorized a suspension of the gold standard for the dollar (which didn't happen).

In fact, he started the printing press for dollars. These measures pushed down the value of the dollar in gold and pounds sterling and boosted the money supply by nearly 10%.

These measures were applauded in a paper by Milton Friedman and Anna Schwartz. They argued that similar tactics would have worked during the 1929 crash and the Great Depression.

Bet you thought Ben Bernanke had invented this strategy! My latest theory is that the Syria crisis will delay Fed tapering but stock markets are too spooked to react positively. Red-ink is flowing on all bourses except for gold and gold shares.

Readers have only a few more days to sign up for Kathleen Peddicord's conference in San Antonio about retiring overseas. Please visit http://www.liveandinvestoverseas.com/cmd.php?ad=644519

to learn more.

More for paid subscribers about our companies including a nice quarterly reports with a dividend hike and other news from Canada, Colombia, Finland, China, Switzerland, Mongolia, Korea, Indonesia, Ireland, and Belarus.

Read more »

The Guns of August

Tue, 2013/08/27 - 11:36am | Your editor

The guns of August are being readied offshore Syria. We are better prepared to deal with the economic consequences now than in 1914, at the outbreak of World War I. Then the US banking system could have been drained of both currency and gold fleeing to Europe. The exchange rate for the dollar fell creating a potential profit for Britons converting US assets into the yellow metal.

And the Fed, barely 7 months old, did nothing.

So the Woodrow Wilson administration took the initiative. By US Treasury order, the New York Stock Exchange was closed for 4 months to stop European investors selling US securities for gold. (Foreigners owned US shares worth more than $4 bn, a big sum then, mostly invested in railroads.)

Then using an old law called Aldrich-Vreeland, Treasury Secy William McAdoo allowed banks to issue unsecured US dollar banknotes without depositing government bonds to back them. He also authorized a suspension of the gold standard for the dollar (which didn't happen).

In fact, he started the printing press for dollars. These measures pushed down the value of the dollar in gold and pounds sterling and boosted the money supply by nearly 10%.

These measures were applauded in a paper by Milton Friedman and Anna Schwartz. They argued that similar tactics would have worked during the 1929 crash and the Great Depression.

Bet you thought Ben Bernanke had invented this strategy! My latest theory is that the Syria crisis will delay Fed tapering but stock markets are too spooked to react positively. Red-ink is flowing on all bourses except for gold and gold shares.

Readers have only a few more days to sign up for Kathleen Peddicord's conference in San Antonio about retiring overseas. Please visit http://www.liveandinvestoverseas.com/cmd.php?ad=644519

to learn more.

More for paid subscribers about our companies including a nice quarterly reports with a dividend hike and other news from Canada, Colombia, Finland, China, Switzerland, Mongolia, Korea, Indonesia, Ireland, and Belarus.

Read more »

My DNA

Mon, 2013/08/26 - 11:39am | Your editor

During Sunday Tel Aviv trading, a mispriced order for shares in the conglomerate, Israel Corp., was entered into the system off 99.88% from the prior price. Then havoc ensured as the automatic circuit-breakers for wildly wrong prices failed to activate. Israel Corp., whose controlling Ofer family plan for tax reasons to move its primary listing out of Israel, now has another justification for going offshore (perhaps to London, where the family head now lives.)

Some weeks ago I ran info from a London reader about BullionVault, which sounded like an interesting alternative to gold exchange-traded funds. The note drew a question from a savvy California reader who questioned why the spread on gold pricing between buy and sell orders is higher in the big and liquid US market than in Canada. My e-mail got a reply from the research head of BullionVault, Adrian Ash. Extracts follow:

"New York has been offered since BullionVault first launched in 2005. Toronto trading and storage was only added earlier this month. But unlike London and Zurich, New York has never attracted great interest from BullionVault users. The vast majority choose Switzerland (75% of client gold property), with London a distant second (20%). Singapore was added this spring, but it's already nearing New York in terms of client gold holdings, rising above half-a-tonne of gold (worth $24mn) this month.

"Client interest affects pricing, and thus the spread. On BullionVault, you set your bids and offers as you wish, or accept firm quotes from other users instead. This open competition (live quote) for physical gold makes BullionVault prices far tighter to private investors than the traditional 'dealer's spread'. Free market forces determine the current best price in any of our 5 locations. If users wish to pay more (or sell for less) in Canada than the US, so be it!

"BullionVault itself also quotes prices 24/7, making a market to ensure a bid and offer whenever you log in. Our users therefore get immediate on-line access to prices quoted by up to nearly 50,000 other users, plus all of BullionVault’s own trading stock, and behind that there's the full liquidity of the deepest bullion market in the world at 2 days' settlement. BullionVault is a full member of the London Bullion Market Association, heart of the world's wholesale gold and silver markets, and all customers can deal away from the Order Board if they wish, trading for just 0.5% at the benchmark London Fix price.

"I don't believe anywhere offers private individuals a broader range of prospective counterparties with greater depth in gold. No other physical bullion service gives its customers such direct control over their trading."

Disclosure notice: Mr. Ash, to boost the US client base of BullionVault.com, will pay my company a fee if my readers sign up to trade physical gold with his firm. Here is the link: http://www.bullionvault.com/GLOBALAD>BullionVault</a>

Mostly comeuppance news follows from Egypt, Israel, Chile, Belarus, Russia, The Netherlands, Spain, Germany, and Australia, Ireland, and Canada.


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