Pre-Hallowe'en Performance

Sun, 2017/10/29 - 12:37pm | Your editor

The Sunday tables have now been posted on the website. Everyone is allowed to view our closed positions, boosted by two takeovers, one for cash, and the other for stock in an NYSE-listed US company, which means it counts as an exit for the model portfolio, although my readers know I am keeping my shares.

The tables also show serious deterioration in our stock portfolio. This can only be viewed by paid subscribers, not pre-subscribers, in part because of marketing considerations. So what is going on?

My taste for averaging down has hurt my performance because of two drug companies which have been penalized for actual or anticipated poor performance under new CEOs. One boosted its dividend to no avail. The other, it is feared will slash its dividend before the new man takes over, to save him from ignominy.

Also hurting our portfolio is the strength of the US dollar, given that most of our stock positions are in foreign currencies. This too will pass.

But that is not all that I am losing from. My US holdings are also doing poorly in the short term also because of my averaging down tendency. I think the reason I do this is because I am not really a trader. I take a long-term view of my holdings which are not really for trading.

Apart from oil stocks which have rewarded persistence, this approach can cause downward moves in the short-term. If I know what is causing the falls I am likely to average down. If I don't know what's up I await more information before acting.

More for paid subscribers follows:

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FAANG Friday

Fri, 2017/10/27 - 1:01pm | Your editor

In Journal of Portfolio Management's latest issue, three experts found that returns are higher in smaller countries with smaller total listed market capitalization than in foreign investing overall. Stocks from small countries tend to have higher average returns than stock from large ones. The country size effect is largely independent from the return on buying small capitalization firms overall. It also does not depend on other quantitative factors like book to market valuation or momentum. The authors conclude that small country higher returns reflect home bias. A smaller country has fewer home investors so stocks are undervalued, giving an edge to the intrepid foreigners who take the trouble to learn about the equities available.

The authors are Gregg S. Fischer, Ronnie Shah, and Sheridan Titman.of Gerstein Fisher, a New York based investment house. It aims at exploiting market inefficiencies, investor biases and valuation errors, and the human tendency to extrapolate current trends way into the future regardless of facts and information to achieve outsize returns.


This is yet another argument against investing in exchange-traded funds tracking a country index. It doesn't work for bonds and there is evidence that it also doesn't work for small caps and small countries which most ETFs ignore because the cost of coverage is high compared to the big markets and their big companies. Maybe I can find a way to short ETFs pretending to be truly global.


*With the European Central Bank moving very cautiously in its 3rd attempt to exit quantitative easing, the euro lost altitude. That means the dollar rose which has nothing to do with anything the White House or Congress get up to. It does mean the odds are higher that the Fed will raise interest rates one more time this year, because US growth was high despite natural disasters in Q3. Fear of Fed is hurting Wall Street more than Trumpian tax cuts can add to stock prices. But thanks to Microsoft and the FAANGs, Wall Street is up again.


More today from Bermuda, Brazil, Britain, Canada, Colombia, Curacao, Denmark, Finland, Ireland, Israel, Japan, Mexico, South Africa, and Sweden.

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Terrible Thursday

Thu, 2017/10/26 - 12:25pm | Your editor

Today is terrible Thursday with a pileup of reporting companies from around the world. So there will be limited commentary. While I lambasted Harvard's poor endowment returns yesterday, today our own holdings are down sharply as the US market drop on Wednesday hit foreign markets overnight. Moreover, a batch of rather ambiguous or even negative results reports didn't boost markets. So here we go covering the news from Belgium to Tanzania. I have used agency reports to translate foreign currencies to US$s to save time.

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Women Chairs, CEOs, and Latinas

Wed, 2017/10/25 - 3:37pm | Your editor

The latest report on Harvard's endowment's stock performance labels the level of returns as “disappointing””. But in contrast to prior years, the latest figures omit details on where the gaps were. In its last fiscal year, the endowment only gained 3.9%, although admittedly from a huge base of $35.7 bn at the close of fiscal year 2015-6.

In contrast to previous years, the new Harvard Management CEO, N.V. Narvekar who was appointed in Sept. 2016 refused to give the Harvard Magazine details about the investment sectors where Harvard's results fell short, although at least Harvard was in the black in the last fiscal year.

All he said was that “natural resources experienced a challenging year” while citing “strong returns” from public and private equity and the endowment's ”direct real estate platform”. However apart from that hint we have no information on where the Harvard Management shortfall came from.

Mr Narvekar also wrote that “the time had come for an aggressive plan to restructure the HMC and create the necessary organizational and investment culture.”

In prior years, the HMC detailed how the endowment was invested, return by asset class, and how it stacked up against benchmarks or HMC's prior 5- or 10-year return from that class. Now analysts, and alumni, are unable to figure out how the current return compares to prior years by category.

In theory the write-down of its forestry holdings by about $1bn cut the investment return by about 3%. However other costs probably include severance payments to former fund managers or costs for recruiting new team members and improving analytics and processes. The endowment is also “designing a new compensation framework,” Mr Narvekar wrote.

I am assuming that the endowment was not tapped to pay fines for a fellow economics faculty member who defrauded the US government, Andrei Shleifer, as occurred in 2005 under the Harvard presidency of Larry Summers, his friend, and which cost Harvard $40 mn or more. In the 1990s, Prof. Shleifer had led a Harvard advisory program to help Russia replace communism with capitalism. Shleifer was under contract from the Harvard Institute for International Development to create a mutual fund for Russia. Instead he and his wife engaged in criminal behavior, using the IID money for personal spending and engaging insider trading, self-dealing, violations of conflict of interest, tax evasion, money laundering, and conspiracy to use false claims to defraud the US government.

The university was deemed to have breached its contract with the US government by a Boston court in 2004 and fined. Summers chose to use endowment money to pay for Shleifer's misdeeds and those of his wife, in direct violation of their contract with Harvard. However, only civil charges were brought, not criminal ones. The couple had invested in a group of Russian companies due to be privatized by Russia based on insider knowledge in direct violation of their contract using a Channel Islands bank account in the name of Mrs Shleifer's father, Howard Zimmerman, and other Americans, and even borrowed money in this country for their stock purchases. Summers kept in touch while he was US Secretary of the Treasury. Harvard's Pres. Neil Rudenstein, who was ill during this period, was out of the loop.

Their doings were investigated by Institutional Investor, a financial magazine which also revealed how Larry Summers protected Shleifer, his former Harvard student. This was why the Harvard faculty ousted Pres. Summers, replacing him with Drew Faust. It also led to the departure of Jack Meyer as head of HMC. Prof Shleifer however remains on the faculty with tenure. I no longer donate to my alma mater'

Health Care

Today we have a key stock reporting on its Q3 and lots of news so I will stop reporting on the scandal which most recently affected on of the shares the Shleifers were linked to in our portfolio, Stada Artzneimittel, which has been taken over. More about drug stocks follows with news also for our tech and telcos, and las latinas, the shares of companies we own from Latin America. And a special note on women heading companies or their boards.

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Mountie Stocks

Tue, 2017/10/24 - 2:24pm | Your editor

Very mixed US economic data today encourages me to talk up global investing some more. The US manufacturing purchasing manager's index rose to the highest level YTD at 54.5 and the services PMI rose even higher (but slower) to 55.9. Services employment and new orders (backlog fell) while both factory employment and backlog rose. However regional data showed problems in the US southeast.

Retail sales were up as we go into the holiday season, but same store sales fell by more than expected, 1.3% vs last October so far and by a scary 3.4% YTD vs the same period in 2016. The cause was probably the hurricanes.


Meanwhile in the euro area, the PMI fell to 55.9 today vs mid-Sept levels of 56.7. The forecast had been a much more buoyan 56.5 and there was no hurricane to explain the shortfall.


Today BofA-Merrill Lynch forecast that the Bank of Canada would delay further increases in interest rates for the rest of this year to check on the economic impact of recent back-to-back rate rises. It expects the Canada CB will only resume raising interest rates in 2018, with hikes to take the overnight interest rate in Canada to 1.75% by midsummer of next year.

The forecast also assumes that Canada and theUS will coordinate its rate policy with that of the Federal Reserve, withdrawing stimulus as rates turn positive. The two central banks will be synchronizing their rate policies.

The Canadian CB would only delay the rate hikes if a breakdown in Nafta negotiations put economic growth and housing sales at risk. (The analysts writing this were Carlos Capstran and John Shin.)

The news that oil prices are rising, with Brent crude at $57.63 and US crude at $52.23 has also boosted the Toronto market.


This gives me a chance to get current with Canada stocks in our portfolio. And other Americas positions.


Wall Street is down across the board today and the dollar is up and, for a change, gold has followed suit. Usually the buck and gold move in different directions. It is a new era, perhaps. ValuEngine says over 61% of US stocks are more than 20% overvalued by their market price. This is a call to action according to the stock advisor.

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Psychoanalyzing Trump

Mon, 2017/10/23 - 1:08pm | Your editor

Judy Lewis Herman M.D., no relation, a Harvard Medical School psychiatrist whom I know from college, has co-authored an article with Bandy X. Lee of Yale whom I don't know, arguing that Donald Trump is mentally unstable and should be impeached by Congress because he cannot be trusted with the life and death powers of the presidency. It apparently referred to his aggressive behavior, constant self-praise, and well-documented lies to diagnose the Commander-in-Chief as a narcissistic personality.

The article was cited today on the front page of the Frankfurter Allgemeine Zeitung website so I cannot give exact quotations. FAZ wrote about “seinen sprunghalftern Verhalten, dem dauernden Selbstlob, den gut dokumentierten Luegen und Trumps Umgang mit Kritiern Anhaltspunkte fuer psychische Problems, zum Beispeil fuer Soziopathie und eine narzisstische Persoenlichkeitsstroerung.” Your editor, who sometimes had to read Freud in the original version, translated.

The article extracts from Lee's book called “The Dangerous Case of Donald Trump: 27 Psychiatrists and Mental Health Experts Assess a President” just published by Macmillan. There are no extracts available on-line in English, the language in which the book was written, and it costs $27.99 new and $17.04 used—amazing since it only came out Oct. 3. I ordered a used copy but it will be a few days before I have read Judy's commentary and that of 26 others. Assuming that Judy remains as compelling a debater as she was in college, you will be able to learn more after I get the book.


Japan is on a roll with the Tokyo index up 1.l% after Shinzo Abe aced his snap election with a landslide. What a contrast to Theresa May!. However the yen is down to the lowest level in 3 mos. Our Japan funds are split, one up and one down.


More for paid subscribers follow from Australia, Brazil, Britain, Chile, China, Congo-Kishasa (a first), the Dutch Antilles, Hong Kong, Ireland, Israel, Kenya, Mexico, Russia, South Africa, and Switzerland. We also have company report from Norway today.

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L'assassin du Dimanche

Sun, 2017/10/22 - 2:51pm | Your editor

Today thanks to an overnight update to my Windows computer I confronted a loss of my programs for getting into my website and creating tables. I am not sure if this was the work of Google or Microsoft but it sure ruined my day. I am reminded of the song Yves Montand used to sing: “L'assassin du Dimanche”. Why do automatic updates perversely remove programs from your computer anyway? Isn't that what Microsoft was fined for a decade ago?

Having asked how to avoid Microsoft removing my programs the virtual agent just told me where to find the Microsoft wersions I do not want. Then Wungrailent V came along to review my conversation and this exotic person seems to have no idea what this is about but he or she did give me a case number, 1401992199 and tried to take control of my computer. I declines Read more »

Elder Statesmen

Fri, 2017/10/20 - 1:41pm | Your editor

Pres. Trump has been criticized in public by his two predecessors, Barrack Obama and George W. Bush, both of whom cited his divisiveness. I imagine they coordinated their statements. House Speaker Paul Ryan used his speech at the Al Smith dinner last night to also roast the president.

Elder statesmen have a role to play in the US and with John McCain fighting a fatal cancer, they opted to fill the gap.

As we have three company results to report on, I will leave you to consider the significance of these attacks on the president.

We have results from Panama, Switzerland, and the Dutch Antilles, all tax havens but also the home of real companies, plus news from Canada, Britain, Brazil, Germany, Hong Kong, South Africa, Australia, Ireland, Finland, Israel, and Russia. We start with the results:

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America First

Thu, 2017/10/19 - 1:01pm | Your editor

Reader FBN of Long Island sent a note about why America is first which may not convince the White House to stop trying to block environmental protection laws. A new study by Mark Wall and his macro team at Deutsche Bank looked at how easy or hard it is to do business in different countries. The US remains number one in 2017 despite the near doubling of regulations in the period since 2010.

US reforms under the Obama Administration increased red tape particularly for financial firms in the wake of the global financial crisis but the obstacle level was vastly lower than that for any other country surveyed.

Among developed nations, red tape was cut by Greece, Italy, Spain, France, Portugal, and Germany. However they all at least twice as many business hurdles as the USA and often the reductions were modest (for example in France which is ranked 31st). In the over-regulated Club Med countries and Portugal, reforms were not sufficient to really reduce the obstacles. Greece was No. 60 in the ranking for ease of doing business today: Italy No. 52, Spain No. 62, and Portugal No. 30.. Note that a history of protectionism by governments of the right remains an obstacle to ease of doing business in southern Europe. Ireland and Britain are the only countries close to as open as the US.

While FBN and Mark Wall may not agree, I think opening a Pandora's box of measures to restrict trade will eventually hurt the competitiveness of US business. While Trump talks a good line over deregulation in fact his policies on borders—fence and tariffs—is going to hurt US business competitiveness in the end. Immigration obstacles ditto.

I find Steve Mnuchin's theory that tax cuts have been “baked into” the price of US stocks to be simplistic. The Treasury Secy has to sooth the ego of his boss, but the rise in stocks has been because of the Trumpian governmnet disarray but in spite of it. And Mnuchkin at some point has to warn his boss that tearing up trade agreements will not be good for US business.


*After IBM bounced high yesterday it bounced some more today. And another Dow monster, GE, is also up. And (hip hip hooray) The New York Times has cleaned up its Business Day stock tables after I sent its PR a copy of yesterday's blog.


More for paid subscribers from Britain, Canada, Chile, China, Denmark, France, Germany, Hong Kong, India, Ireland, Israel, Spain, Sweden, and Switzerland.

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Feuding Gold Bugs; Apologies to Microsoft

Wed, 2017/10/18 - 1:02pm | Your editor

I wrote to the NY Times because its Business Day section is taking to publishing stock tables which are wrong. The Most Actives, Gainers, and Losers shown on page 8 of my newspapers yesterday and today only show shares whose ticker symbols begin with the letter 'A'.

The newspaper replied to tell me if my “letter is selected for publication... we will contact you within a week.” Nobody bothered to read it. Moreover, since I do not have a telephone number they can dial to check on me, probably it will never be acted upon.

I have to subscribe to the Wall Street Journal instead, which I now only buy based on Dow-Jones tabs about our stocks.

I'm sorry about having been rude about Microsoft yesterday. Unlike the other service providers which cop out they really did help me even though it took ages on the line to the Philippines. For why, read my blog for subscribers below. Or subscribe.

The function of customer service has been reduced to form letters—and form phone calls. Our telephone lines were not restored as promised for Monday or Tuesday and we are back in begging mode. They were supposed to come yesterday before 5 pm but did not show up and nobody bothered to call us up on our cellphones to tell us this. Now they are planning to come in mid November but have graciously offered to link our cellphones with the dud lines. You can now call me up.


We managed to get to the Balliol farewell for my husband's college's last male master. The next on is a lady. At Oxford, students live in different “colleges” which give them their diplomas. Balliol is known for its “effortless superiority”, whatever that may mean. At the party here I met a younger Balliol man manager for a US bond fund for BNP-Paribas. I asked him what a senior like me should be buying in the bond arena when US interest rates are rising and he replied, effortlessly, “Nothing.”

Actually you might consider Pimco Total Return Fund which Bill Gross walked away from in Sept. 2014. It is beating its indexes again under Daniel Ivascyn and his team which succeeded Gross. It does so with 2 kinds of short: first a 12.2% short position in international developed fixed income bonds, and second a 26.4% short position in short-term instruments.

In effect it is doing what the Balliol man suggested makes sense, by being nearly 30% short in the fixed-income field. We do not cover open-end funds like PTTRX, which mostly invests in the USA. It pays dividends monthly, so this note is for general consumption. Frank Talbot of helped.


More for paid subscribers follows from Australia, Bermuda, Brazil, Britain, Canada, Denmark, Finland, Hong Kong, Iraq, Ireland, Israel, Mozambique (a first), Panama, Russia, South Africa, and Spain.

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