British Confusion

Thu, 2017/06/29 - 7:24am | Your editor

The masters of the British economy are now at loggerheads, probably an indication that the Theresa May premiership is near its end. She followed up her giveaway to collect the votes of the Northern Irish Democratic Union Party with a statement that other austerity measures applying to the rest of the UK will also come to an end, starting with the 1% pay rise cap for public sector employees.

This undermined the efforts of the Chancellor of the Exchequeur, Philip Hammond, to continue to trim budgets, and Mr Hammond lashed out against the £4 bn cost of a civil servant pay hike to keep up with inflation—in part because it would be copied in the private sector as well. Labour leader Jeremy Corbyn already has come out for a tax and spend budget, and restraining pay rises now infects No. 10 Downing Street as well.


Meanwhile the Bank of England, their central bank, is signaling that there will be a rate rise, perhaps. This boosted sterling and interest rates in anticipation, at least until the experts warned that the hint from Gov. Mark Carney was not as hawkish as the “over-reacting” market appeared to believe, according to BofA-Merrill Lynch. Will there be wage increases in Britain? Will there be stimulus? Will sterling rise? Investors probably cannot answer these questions, but if Britain continues on its route to exiting the European Union, Brexit, the answer will probably be 'yes'.


So the real question is whether the Brexit will take place. Or to quote John Llewellyn of the eponymous UK consulting firm: “It may not be the nature of the government that determines Brexit, but Brexit that dermines the nature of government.” John, the former deputy chief economist of the Organisation for Economic Cooperation and Development, questions the theory that P.M. May has the clout to get a deal with the European Union, get it approved by her party, and get it passed by Parliament. He points out that there are only about 130 supporters of an outright Brexit among the Tories (Conservatives) in Parliament.


Like my Europhile husband, Llewellyn, whom we know from Paris, says “Brexit makes little sense”. Reasons include real problems which he cites: “reduced access to the world's largest market; exposure to tarrifs on exports; behind-the border restrictions on services; the creation of more than 30 new regulatory agencies; establishment of border controls and customs post; re-introduction of a hard border within Ireland; the need to renegotiate balanced fisheries rights; the establishment of a new agricultural policy; the renegotiation of airline rights. The list goes on and on.”


He forecasts that as the talks proceed the British peoiple will agree that “many facets of Brexit make no sense [and] come at such a cost and create so many difficulties that it should not happen.” He expects a backlash further wrecking the reputation of the Tory Party and expects there to be a split in both Conservative and Labour Parties as Brexit advances.


Among the surprise news this week is a plunge in the Hong Kong market for small stocks, after China was added to the MSCI Global and Emerging Markets indexes. Many of the 13 crashed stocks are part of the 50 “enigma” shares identified by Hong Kong watcher David Webb, a spaghetti junction of inter-related cross-holdings of companies which appear to invest in each other, among them a UK football club owner, an umbrella-maker, a medical devices firm, and other plausible-seeming stocks. As many as 40 of his enigma stocks fell further yesterday with the worst performer, the umbrella-maker, down 94%. Mr Webb, an independent investor, told the Financial Times that the crash should be blamed on poor regulation by the HK Exchange and the Securities & Futures Commission.

The latter is now trying to limit short-selling, something like closing the barn door after the horse has escaped. The real issue is that HK small caps can produce meaningless and misleading accounts.

More for paid subscribers from Canada, Spain, Britain, Japan, Switzerland, Israel, Finland, Thailand, Mexico, Germany, Brazil, Chile, Hong Kong, and Colombia follows.

Crime can pay. Arconic rose 5.8% in US trading yesterday, topping the gainers.

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Hack Attack!

Wed, 2017/06/28 - 6:48am | Your editor

*The British Tories have started fighting each other over the future course of UK exit from the European Union (EU) and Theresa May faces the threat of a putsch such as ended the premiership of the last female Prime Minister, Margaret Thatcher, plotted at the Gandhi Restaurant near sister-in-law's. I don't know where Chancellor Philip Hammond, the supposed grown-up in the room, Boris Johnson, the juvenile delinquent, and the Brexit team led by David Davis hang out. The plot is thickening.

Meanwhile Britons are becoming more comfortable with a Labour Party policy of tax and spend, put forward by Jeremy Corbyn after his surprise win. He started by boosting his youth following by coming out in favor of free higher education, but with the recent terrorist and disaster events, voters want to reduce the gaps between rich and poor, and between different ethnic groups, rather than banning foreign entry. As with Trump's Muslim ban, the Brexit vote was partly about keeping foreigner out, but people are having second thoughts here.


*Another US firm has become entangled in the Grenfell fire investigation. The refrigerator-freezer-maker where the fire began was made by Whirlpool, which on foreign markets backs appliances with plastic. In the USA only costlier fire-retardant metal is used, because of our country's well-known lawsuit and insurance risks. The foam behind the back is a fire risk which American refrigerators protect against but British ones don't.

With Pres. Trump promising to cut two regulations for every new one passed, the better US safety record may tumble. But note that unlike in our country, Britain allows corporations to be charged for manslaughter, meaning that like Arconic, Whirlpool faces a protacted period of costly ligitation there with serious potential consequences and reputation risks. ARNC fell another 9% yesterday.

Safety should not depend on the letter of the law but be a concern of manufacturers world-wide. They should use the best systems worldwide even if the law doesn't require it. The increased profits from cutting corners are marginal, and human lives are at stake.


*Revelation that Google search favored its own advertisers over the rest of the market was shocking enough, but now the EU Commission is fining and regulating its Alphabet parent, starting with a fine of euros 2.4 bn. Monopolies have been a no-no in Brussels since the start of the EU with the Treaty of Rome The regulators, led by Margrethe Vestager of Denmark, are cracking down hard on abuse. A,B,C,D,E,F,G; Google is not good for me. The offenses occurred a decade ago, and since then Google has become more dominant globally.


*Another huge cyberattack on Windows computer systems which did not get upgraded to remove the EternalBlue hole after the last hack faded away has hit. The hack attack victims are mostly corporate. But if you get a message with an attachment from someone you don't know, or with a wrong return address, DO NOT OPEN IT.

The new virus started in Ukraine on a holiday through a fake update, but has spread throughout Europe, Australia (to a Cadbury chocolate factory), and India (the Mumbai container port) run by Danish AP Moeller-Maersk) overnight, and affected US multinational corporations. Like the one which disabled the UK National Health Service last month, this one is also collecting ransom from affected computer owners via Bitcoin to get a key to unlock their computers. Like the earlier hack, hospitals are being targeted. They are often too busy to install recommended updates.


More for paid subscribers about energy and internets, from Finland, China, Canada, Britain, Colombia, Denmark, Germany, Israel, Korea,  Switzerland, Thailand, and a few other places. Join them to get the full monty from

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Two Breaktrhough Deals; One Breakdown

Tue, 2017/06/27 - 5:45am | Your editor

What makes the Arconic saga so horrible for this writer is the fact that its parent was Alcoa at the time the company's fire-conducting cladding was sold to the builders of the north Westminister tower block where 79 people died. And I invested in Alcoa (and got ARNC shares in a spinoff later) because a college friend was on its board, an economics professor a year behind me at Radcliffe, who married into a French family who were our neighbors in Brussels. I felt that this was an exemplary company because Judy, a specialist in labor economics, was on its board and keeping the directors honest.

My disillusion began when CEO Klaus Kleinfeld was forced to resign from his cushy, overpaid post earlier. But the Grenfell Tower horror, where at least 79 people died because of a fatal push to sell an unsuitable product to British builders, has totally undermined my hope that I can invest ethically in the USA, as I try to do internationally.

I am not upset that the share lost 6%; I am deeply upset about why. Only after the fatal fire has ARNC said it will no long supply polyester filled aluminum panels, called Reynobond PE, for us in high-rise buildings.


My father's high scholl town of Bad Hersfeld, in Hesse, is staging a play about one of the heros of the region, Martin Luther. It features so much internal dialog over the rights and wrongs of what the monk got up to 400 years ago that director Dieter Wedel was able to fire the actor playing Luther 3 days before the dress rehearsal without a qualm. There would be no problems for the production, he told the Frankfurter Algemeine Zeitung, except for what was already baked in that is. The Reformation leader doesn't come out a hero but a zero, because he supported the existing power structure and was an anti-Semite.

I wonder if the same conclusions would have been reached a century ago when my father was a little boy of 6 growing up nearby? Of course had everyone been aware of Luther's faults Germany would not have had a Kaiser or Hitler and I might have been born in Germany instead of the USA.

I would have better government health insurance if that had been the case.


Today we have breakthrough good develpments from two of our non-US companies which will boost their stock valuation and other news from Mexico, Canada, Sweden, Finland, Colombia, Brazil, Japan, South Africa, Hong Kong, Germany, Israel, and a few other places like Cambridge, Mass. There we have a breakdown bad development.

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Fun In London

Mon, 2017/06/26 - 5:53am | Your editor

Two great experiences last weekend in London. First my brother- and sister-in-law treated us to a brilliant fringe theatre musical, in the Southwark Theatre, Working, based on the writings of a Chicago oral historian, writer, and broadcaster, Studs Terkel. His career bridged the gap between the New Deal Federal Writers' Project and Barrack Obama.

0The revival of the “documentary” musical first performed in the Windy City in 1977, and on Broadway a year later, came in 2007 when the original song-writer, Stephen Schwartz, brought in Lin-Manuel Miranda to write new interviews to cover new forms of work, UPS “brownies”, computers and cellphones, or teaching English as a second language. That is the same Miranda who went on to write Hamilton”, so hard to get tickets for that I suspect it will not be possible in my lifetime. So I was comforted with the lively cast and non-be-bop lyrics of the older play.


Sunday we went to the Dulwich Picture Gallery to view the John Singer Sargent exhibit focused on the American artist's watercolor landscapes and portraits of his cosmoplitan friends and family. It firmly established Sargent as a key artist of the turn of the 20th century, not an impressionist, not a war painter, not a primitive, not a photographer, not a Hudson River School aritist—but a major painter influenced by all of these movement going on at the time. His society portraints were not on display. The Dulwich exhibit showcased his “edgy” perspecitive on buildings, people, or landscapes based on photography; his painting 3 dimensional white objects in watercolor, skirts, cattle, sails, and glaciers. He lived in Europe among the American expats but moved to the US in 1918 for good.


Toadying to the Haredi Ultra-Orthodox parties in his coalition, Israeli PM Benjamin Netanyahu has again banned me and other women from praying at the Western or Wailing Wall in Jerusalem. We have a subterranean alternative site under Mount Moriah, probably as near to the Temple as the Wall is, but subject to security and harder to get to. Just what Theresa May gave way on to bring the Democratic Union Party into her coalition to achieve a majority is not yet known, but likely to be just as obnoxious.


More today for paid subscribers from Britain, New Zealand, Switzerland, India, Japan, Sweden, Italy, Hong Kong, South Africa, Spain, Israel, Thailand, The Netherlands, the UAE, Mexico, and Germany.

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Brexit Anniversary

Fri, 2017/06/23 - 9:08am | Your editor

Qatar today got 13 demands from its neighbors for restoring relations, including cutting funds for Al Jezeera, ending its rapprochement with Iran, and shutting relations with the Muslim Brotherhood, ISIS, Al Qaeda and Hezbollah. One demand, that Doha remove the Turkish base on its territory, will not be accept by Nato-member Turkey. Some of the other alleged infractions are unproven.

Meanwhile Qatar Airlines told American Airlines CEO Doug Parker that it plans to buy 10% of AA, at a cost of over $800 mn, and this set tnto take off mode the stock of the beleagured airline which dragged an elderly Vietnam-born doctor out of an overbooked flight. A linkup could also scupper the Trump ban on passengers from the Middle East.

Israel's El Al has problems with seating as well as it just lost a lawsuit brought by an 83-year-old Holocaust survivor who was forced to move her biz class seat when her presence was objected to by a Haredi ultra-Orthodox male. Renee Rabinowitz was backed by the Israel Religious Action Center in her case based on Israeli laws against sex discrimination. To get the women moved, lest they brush against their bodies inadvertently and sinfully, the ultra-Orthodox men stand in the aisle preventing the plane from taking off. The Netanyahu govt, which needs to Haredi MK members to keep office, has been lax about protecting women from these shenanigans.


Today is the anniversary of the UK Brexit vote and there are plenty of Brexit regrets, one reason that the Labour lefty who is a weak supporter of remaining in the European Union clobbered PM Theresa May, a now weak supporter of a “hard Brexit”--no longer a supporter of cutting EU immigration to Britain and European Court of Justice oversight of UK legislation. These were the motivations for the Brexiteers and her rise to power. The backbench Tories are plotting for her removal while Jeremy Corbyn tries to move toward the center by cutting his plans for boosting taxes on the rich and supporting the Palestinians. He will have problems, as will any of the present Tory challengers. If polls are to be believed, a rerun of the Brexit-Bremain vote a year on would change the outcome.


Meanwhile back in the USA the hush-hush Senate compromise, despite its nastiness, still looks unlikely to lead to the revocation of Obama care, as Tea Party stalwarts will not accept anything short of a purely voluntary American Care Act. The Senate bill proposes that there be no penalty for healthy young people refusing to buy health insurance so other means have to be devised to pay for pre-existing conditions being covered. The way they'll do it is to cut Medicaid for poor Americans. They also propose that Medicare recipients , older people, no longer be taxed to help cover the cost of the ACA. The medical great and good from the American Hospital Assn to the American Cancer Society, from the AARP to the Assn of American Medical Colleges all oppose the Senate bill.


Yet yesterday the prospect of repeal was enough to boost US healthcare stocks by 1.4%. More on this follows from our shares along with news from other sectors from Britain, Canada, Switzerland, Hong Kong, Japan, Canada, Israel, Ireland, Denmark, and China.

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Bulls in China Bourse

Thu, 2017/06/22 - 11:07am | Your editor


Yesterday evening there was a sudden eruption of music outside the windows of Mudchute Manor, our London base, and about 50 young hippies sat on the sands of the drawdock. A singer, Charles Hayward, accompanied by a violin mournfully recounted the deaths of sailors while occasionally hitting a drum or cymbals. It was lucky we didn't have one of the speakers, as this turned out to be the Inaugural Longplayer Day, from noon to midnight, celebrating Midsummer, June 21.

The people were in a 12-hour free musical, film, and speeches program marching eastward from Goldsmiths College to Trinity Buoy Wharf with stops beer. It certainly sounds more convincing than gathering dressed as druids at Stonehenge at sunrise.

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Pubs, Pizza, Princes

Wed, 2017/06/21 - 5:46am | Your editor

Despite my skepticism, China today was added to the MSCI EAFE index by its managers, 4 years after the application was first made. Now A shares traded only in Shanghai and Shenzhen will have to be purchased and sold by index-tracking exchange-traded and other mutual funds. The initial impact will be slight, as only under 0.5% of the EAFE index will be made up of Chinese Mainland shares, because of liquidity rules. State-controlled or closely held companies are not indexed. Longer term, however, this gives China a foot in the door. And it is also a symbolic victory for Beijing.  ​​However, the index ​group turned down adding Argentina to EAFE and left Nigeria in the category of merging market. It also turned down a Saudi application to become part of EAFE.


The Saudi Arabian system for rotating clans of the offspring of founder King Ibn Saud to run the country has been thrown into disarray today.  King Salman, 80, ousted the Crown Prince, Mohammed bin Nayef, and named his own 31-year-old son, Mohammed bin Salman, as his official successor. Bin Nayef was also removed as Minister of the Interior. This is something like the rise of the Tudors in Britain and can lead to extreme instability, along with the shrinking price of oil.


My note on the local pub here was criticized, erroneously, by a UK chronicler of the Royals, reader John D. He said the courtship of Princess Margaret took place at the Waterman’s Arms pub. Indeed that is so, but the old pub-restaurant was sold and renamed about 15 years ago and now is the Great Northern, a backpackers hostelry, internet hangout, and pizzeria with nary a royal in sight. Snowden and Princess Margaret did not eat thick-crust pizza, the current at the pub, but real food lovingly prepared at the old Waterman’s Arms. But that is still no excuse for a teardown.


Speaking of pizza, my taste-test of Domino’s Pizza UK & Ireland when the share was first listed 3 years ago turned out to be prescient. After rising for a while because of the novelty effect, London-listed DPG yesterday shrank down to a mere slice of its former size, off 6.5%.

More news about our holdings follows from Britain, Japan, Panama, Canada, Ireland, Hong Kong, Mexico, Colombia, Bermuda, the Dutch Antilles, Fin- and Switzer-land.

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The Local Pub Teardown

Tue, 2017/06/20 - 11:05am | Your editor

For the 4th time the MSCI indexers are considering whether or not to add Mainland Chinese listed 'A' shares to their global market coverage in the MSCI Europe, America, and Far East (EAFE) index. This is leading to lots of position-taking in the largest stocks listed in China proper but not yet in its window to the world, Hong Kong. In fact the likelihood that China will represent a serious part of the global MSCI index in the short-term is low, because many listed companies and banks do not meet international market standards, being state-owned. And even if some of the shares being acquired do join the MSCI, the funds which follow it will take their time piling into these stocks, which will probably never amount to more than 3 or 4% of the MSCI total. More on the MSCI EAFE Index below for paid subscribers.

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Macron Macro Win

Mon, 2017/06/19 - 8:21am | Your editor

Emmanuel Macron is estimated to have control of the French National Assembly after the vote Sunday. His France en Marche party won 308 seats according to the latest count, along with antoerh 42 seats for the MoDems who also back his governmnet. It only talkes 289 seats for a majority. However, the vote turnout was particularly low so there will have to be negotiations over changes in key labor laws.

Meanhile the Finsbury Park mosque was attacked last night after the Ramadan fast and at least one person has been killed here in London. And it turns out that I am partly responsible for the horrible fire in the Council high-rise building in north Kensington, as a shareholder in Arconic, the maker of the aluminum cladding that was the vector for spreading the flames. I own shares in this recent spinoff from Alcoa although of course it did not want the company to mis-sell its products. I happen to know a former member of the Alcoa board because her parents in law were our neighbors many years ago in Brussels, and she too would not have allowed mis-selling of products either.

More for paid subscribers from Denmark, Israel, Britain, Ireland, Finland, Japan, Hong Kong, India, Sweden, Panama, Germany, Spain, and Brazil today.

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No Stolen Picasso at White House or No. 10 Downing St.

Fri, 2017/06/16 - 7:03am | Your editor

Jared Kushner and indirectly his wife Ivanka Trump are now in the sights of special counsel Robert Mueller (I am leaving out his middle initial and 3 ticks because he is now famous.) He is looking into  the first (and only) son-in-law's financial and business relations, according to knowledgeable (but anonymous people) cited by the The Washington Post, quoted by European papers. Before his father-in-law took office, his family members met with Russky ambassador Sergey Kislyak and a Moscow banker, and are now the focus of an FBI investigation. One of Kushner's lawyers told the newspaper which broke the Watergate affair that nobody knows what the investigation is about. To translate from German, the whole process will be examined and the special counsel will look at financial underpinnings seeking links to Russia, according to lawyer Jamie Gorlick. Trump meanwhile twitters on, arguing that the relations of the Clintons and the Democrats should be examined along with Bill Clinton's meeting with the Attorney General over the email affair.


Back in the other center of the English-speaking world, Britain and the European Union confirmed that the British Brexit Secy David Davis will go to Brussels Monday to start talks on the terms of the UK's withdrawal from the EU. PM Theresa May decided to press ahead with exit talks despite her Conservative Party still lacking a majority, as it is still negotiating with the Northern Irish Democratic Union Party to get their votes in order to govern.


There is a smell of fin de regime in Washington and London. Martin Ferera, writing from Canada, says “the Maybot, as she is unflatteringly called, managed to blow a commanding lead in the polls and win yet lose the UK general election. Now Britain not only has an unstable minority government but is faced with the possibility leftist Jeremy Corbyn can become the next prime minister. The chaos to come may result in Britain becoming again what it was when I moved there in the 1970s from what was then Rhodesia: the sick man of Europe."

My husband, a born Briton, says his country is only “the most confused” in Europe. We are doing better than Malaysia at least. No stolen Picassos have been spotted at No. 10 Downing Street or in the White House.

Martin has some stock moves in mind for paid subscribers, given below along with news from Switzerland, Hong Kong, Denmark, Israel, Japan, Britain, France, and Canada. Also a comment about interest rates and energy prices by your most confused editor. We fly back to London this Sunday from our Portuguese stay, which was for family business. I am filing early as is explained to paid subscribers below.

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