A Letter to the President
Dear President Trump,
As your former neighbor in zipcode 10022, I have a suggestion for improving the performance and credibility of your administration. Please consider becoming Shomer Shabbat, Sabbath-observant, like your daughter Ivanka and son-in-law Jared Kushner. That would entail not writing or signing anything during the period between sundown on Friday night and the appearance of three stars on Saturday night.
The reason for my suggestion is that when the Kushners are observing the Sabbath and are not available to advise you to offset some of the other elements of your team, you make bad moves. The first time was when you attempted to block entry to the US by people from seven Islamic countries including ones already holding visas, which occurred on a Sabbath. Now apart from unblocking the arrival here of people with visas, you opted to remove Iraqis from the list of people banned from entering the US, after someone pointed out to you that the ones with the visas were probably helping US forces there and at some risk to their lives. Read more »
Tables and News
The Sunday tables have been posted on our www.global-investing.com website.
Please visit the site to view our tables, of current stock and bond holdings; current closed-end and exchange traded funds; and, for everyone, information on our closed positions, showing our performance. To view tables more easily use the print button.
Since Barron's tables on closed-end funds are both too tiny to read without a magnifying glass, a week out of date, and incomplete, I am using fund sites and the CEFA Closed-end Fund Association website for the valuation data, and my own stock account for the closing prices.
Unusually, we have news on a Sunday and moreover not from a market open today (like Israel). More for paid subscribers follows, mostly about funds.
Russia, Mexico, and the Fed
It's okay to have business links with Exxon or even Goldman Sachs but nyet to ones with the Kremlin.
The chances of a restart of US-Russian relations are rapidly falling because any move by our presidential deal-artist will now be hampered by his and his team's lies about Putinland relations during the campaign. Instead of cautiously rebuilding relations, we will instead be seeing vast new military spending, to prove links with the Russkis did not compromise Team Trump.
An opportunity lost, with a third president in a row unable to reset relations with Moscow. I think it almost certain that meetings between Jeff Sessions and the Russian ambassador to Washington were authorized by then-Republican candidate Trump. An experienced Congressman and lawyer knows how to cover his back better than a maverick general like former National Security Adviser Mike Flynn, why Sessions will survive.
Bloomberg today presents another take on the Administration's harassing Mexico, suggesting that two million jobs in border states like Arizona and Texas—which went for Trump—are linked to exports southward. So tit-for-tat tariff battles would hurt US jobs. Meanwhile in a CNBC interview, new US Commerce Secy Wilbur Ross suggests that rather than tariffs and retaliation, the new NAFTA trade deal should aim to strengthen the peso and stabilize the exchange rate. He said “if we and the Mexicans make a sensible trade agreement, the Mexican peso will recover quite a lot. This is already happening in the relationship between the two central banks, the Banxico and the Fed, which arranged swap deals to boost the peso (MXN) this week.
There is a secret reason for this reasonableness over trade and currency. If Mexico is forced to raise interest rates further to protect its currency, there will be negative impact on growth and prosperity south of the border—triggering new immigation, the worst solution for either side. So improvements in the Mexican economy can cut the move northward of workers seeking to improve their standard of living. Rather than building an un-affordable wall, wiser heads in Washington are working on building links. The MXN has been rising against the Greenback in anticipation of policy changes, up 2.45% today after falling over 8% in the last year.
Apart from treating ADR shareholders the same as Mexicans in proxy votes, my personal hobby-horse, the NAFTA reforms will tighten up rules of origin for goods assembled in Mexico with parts from Third Countries, according to Ross. The target will be “preventing illegally subsidized goods from coming in, and really enforcing it.” We ran into a problem with one of our Mexican shares last year because its access to US markets was being undercut by subsidies to Chinese competitors, on which it filed a complaint with the Federal Trade Commission.
There also is work to be done on tariff and non-tariff barriers to trade (Ross failed to say on both sides, but I will. Blocking Mexican trucks from operating beyond the frontier in the US heartland is an example of a US NTB.)
*Janet Yellen seems set to raise US interest rates this month rather than waiting. One hint on why came from a BBC interview with Alan Greenspan the night before last. When asked where the funds were for the spending in the Trump State of the Union address, he answered “hidden”. He called the populist's votes “a cry of pain.”
Wall Street is trying to decide if it will closed the week above or below the 21,000 the Dow hit earlier. Financials are up and not only here, but other sectors more troubled.
More news today from Canada, Britain, Germany, India, Colombia, Mexico, Finland, Ireland, France, Spain, Sweden, Switzerland, and a few other places. I am catching up with news skipped over this week in the coverage of results, so there are many snippets.
O Happy Day, Kalloo Kallay
Today we have good news for a change, starting with a boost for my business, running a newsletter for profit. Yesterday's public blog article about the under-representation of those owning American Depositary Receipts for Mexican blue chip stocks got me a mention by Dimitra deFotis in the Barron's on-line daily blog and increased our circulation in one fell swoop. Welcome aboard Dimitra and her followers.
Today's blog includes some more information about how retail investors can buy stock across borders, and how they are discriminated against, this time from Canada, another NAFTA country.
We also benefited from a really bang-up result from a Latin American company we recommend, which starts the paid blog today and another major bit of news about surviving breast cancer from one of our European pharmaceutical stocks.
Being a child of the Cold War like Pres. Trump (as well as a teenager in the civil rights movement, unlike him) I signed an Avaaz petition today calling for Attorney General Jeff Sessions to resign over his two secret meetings during the campaign with the Russian Ambassador—after which he lied under oath about this during his confirmation hearings. Join me at www.avaaz.org/
We have news from Chile, Switzerland, Argentina, Britain, Australia, Canada, Britain, Israel, Denmark, Mexico, India, Sweden, Ireland, and Brazil.
Mexican Stock Reform Needed
When renegotiating the terms of the North American Free Trade Agreement, here is something to change.
US investors in listed Mexican American Depositary Receipts are often denied full proxy voting rights. This is most likely to occur in the case of the most liquid large capitalization Mexican shares on the Big Board, like one on our recommended list which has been an easy way to buy Mexican growth for decades.
This company, like many venerable US stocks from Mexico used to have two classes of shares traded in Los Estados Unidos, called the A and the B shares. They had different voting rights, different ratios to the Mexican shares they represented, and were on different markets, the NYSE or trading OTC. As the Mexican market matured, the multi-class shares were combined on the local market, the same thing as it happening now in Brazil. In the case of our Mexican share, it happened at the end of the 20th century.
The result is that the ADR you buy today from your broker is made up of Certificados de Participacion Ordinarios, CPOs, made up of both former classes of shares, now unified.
However, the voting rights that go with ADRs are not equal to those for CPOs in Mexico itself. The A share component of the CPO (and therefore the ADR) doesn't give yanquis the right to vote on proxies. Only the B shares have voting rights. Since your ADR is made up of two former A shares and only one former B share, that means your vote is worth only 33 percent of that of a Mexican shareholder in the company I am writing about. That it takes 10 CPOs to make up an ADR doesn't change the fact that US holders are disenfranchised ADR. Similar discrimination is widespread among Mexican ADRs.
I assume the purpose is to protect the board from interference over its membership, its ability to issue new shares watering down those of existing shareholders, and approval of its accounts. However as we have seen in Mexico and other Latin American countries and even in Europe, giving the board a free hand can lead to corruption, fraud, and looting of companies.
It is time for Mexico to grant equal rights to US shareholders in its companies.
More for paid subscribers follows with the name of the company, Irish and Canadian company results plus news from Mexico, Canada, Israel, Denmark, Switzerland, Nevada, Australia, Korea, and a few other places.
Waiting for Trumpot
Today is Fasching (Shrove Tuesday or Mardi Gras). I celebrate it every years because it is the key to my existence. My parents met at a Faschingsball on the Upper West Side of Manhattan, despite both being Jewish and therefore not in need of a blow-out before the start of Lent. The reason was that when young German Jews arrived in a country where they were not banned from fun—as they had been in Nazi Germany—they partied.
India surprised not because growth slowed in the Dec. quarter—as expected given the withdrawal of high-denomination cash—but how little growth slowed, from 2015's 7.4% to 2016's 7%. Analysts had predicted that GDP would only rise 6.4%. What this shows is that people with spare cash are not the drivers of the Indian economy. The drivers are poor people who don't have 500 rupees to rub together. (The high valuation notes withdrawn were for 500 and 1000 rupees, approximately worth 7.5 cents and 15 cents respectively.) The New Delhi statistical office expect full fiscal year growth (to end March) will be 7.1%.
At 9 pm today Pres. Trump will have to stop tweeting and provide guidance on what policy measures are coming, when he delivers his State of the Union address to Congress. The stock market is teetering today (as it has been for days) because of fear that economic stimulus and infrastructure spending will be delayed—or that trade policy plans will turn out to be more protectionism than anticipated. Either will trigger a sell-off tomorrow. My personal suspicion is that the Dow drops of the last few days, which miraculously reversed at the 11th hour, were staged by the Administration. Yesterday's drop was reversed when hoopla over defense spending was delivered to kill the bears. So we have had 12 days of higher share prices (although not very much higher share prices.) The trouble is that another surprise win is harder to manipulate today as all eyes will be on what the President says and how he says it.
And Lent begins tomorrow.
India, one of my
More for paid subscribers follows with first a couple of extremely rare result reports and one which is widely available, and news from Britain, Australia, Argentina, Germany, Canada, Mexico, Brazil, Chile, Israel, Spain, Ireland, and a few other places.
My Letter from Yellen
Whoopee! My problems are solved.
“On Saturday, February 25, 2017 8:00 PM, Federal Reserve Bank <email@example.com> wrote:
“Federal Reserve Bank
20th St. and Constitution Ave. N.W
Mail Stop K300
Washington, D.C. 20551
“Your payment files from three (3) different banks, Natwest Bank of London, Central Bank of Nigeria and Bank of America was compiled and submitted to my desk this morning for review. The total sum owed to you by the 3 banks mentioned above was sum up to the tune of US$15,500,000.00 (Fifteen Million Five Hundred Thousand United States Dollars).
“Now the fund has been totally lodged in one particular Escrow account (non deductible) here in the Federal Reserve Bank on your name, while waiting for accreditation to your personal bank account in any part of the world.
“Meanwhile, after due scrutiny and verification, I confirmed that you have fulfilled all the necessary obligations that will enable the release of your payment to you, but yet your payment was not released to you due to one flimsy excuses or the other from the Bank officials in charge of your payment, because they had the intention of diverting your funds to their private accounts in order to satisfy their selfish interest.
“You are however lucky that we the management of the US Federal Reserved Bank detected their evil plans and therefore call for the submission of your payment file to us so we can personally handle the payment assignment to ensure that you receive your funds accordingly.
“Now, all modalities regarding your fund release has been put in place here in the Reserve Bank of America, thus, your funds has been made ready for transfer in our sophisticated macro transfer system, what we need from you now is to provide to us the bank account of your choice which you want us to transfer your funds so we can expedite action for the accreditation of your funds into your account immediately.
“Below are the information needed for now for your transfer.
“1. Personal Details:
Direct Mobile Number:
Passport Copy, ID card or DL:
“2. Banking Details:
“Note: If you prefer to receive your funds in form of a Visa Card, we could load and ship your Visa Card to your address which will permit you a daily withdrawal limit of US$3000 or write a draft check which can be deposited in any bank and send to you.
“In anticipating for your urgent cooperation
Janet Louise Yellen
Federal Reserved Bank”
While I don't want to compare the stock market to these miscreants, I consider that the Friday reversal of almost a full day of dropping prices at the 58th minute of the last hour of trading is almost as suspicious as the above email. The result was an 11th straight record high for the Dow-Jones Industrial Average, based on a rise of 0.05%. This is something less than an epic winning streak.
To read about our stock picks for 2017, and those of others, please visit http://pdf.moneyshow.com/SPECIAL_REPORTS/TOP_PICKS_REPORT-2017.PDF
More for paid subscribers on my picks and news from Israel, Australia, Japan, Sweden, India, Germany, Finland, Canada, Britain, Switzerland, Brazil, Spain, Portugal, Ireland and a few other places.
I just posted the tables on www.global-investing.com, as I do every Sunday. We have a new problem explained to paid subscribers belows, but meanwhile you can look at the charts showing our performance. Everyone can look at the closed positions but only paid subscribers get to see our current stock, bond, and fund picks. To view the spreadsheets more easily, use the "print" button even if you don't intend to print the tables.
Barron's while becoming less politically impossible about the Trump stock market rally, has seriously reduced its usefulness as a source of stock performance. While the weekly repeatedly tells us that closed-end funds are a great way to buy cheaply portfolios of stocks, and to intelligently buy bonds, there are no advertisements from the CEF companies. So here is what is happening:
1) The print size of the closed end fund data has been reduced to squint size and even with my reading glasses on I need to use a magnifying glass (provided by Value Line, for which thanks. Read more »
A Sergeant Writes
I'm the canary in the coal mine. Yesterday my brokerage account access went down. Today the whole customer base lost access to e-trade accounts. This came less than a day after I published a special report for my paid subscribers about cyber-insurance. It is free to subscribers.
Some readers wrote about my Truman-Trump comparison yesterday. FN, of Long Island, himself a veteran (having made it to sergeant), noted that Truman served in the First World War despite being exempt because he was a farmer.
FN writes: “He volunteered. Starting out a private in the Missouri National Guard, he was elected by the members of his unit to be granted a commission. Election of officers apparently ceased before World War II. What is especially significant is that this was the first election Harry Truman ever won, from fellow soldiers who trained with him, ate with him, used the latrine with him. They picked him as their leader." It does make TRUMp look bad in comparison.
More for paid subscribers including the usual flurry of annual reports of the season, plus news from India, Britain, Ireland, Canada, Mexico, Brazil, Ireland, Switzerland, Hong Kong, and Euroland.