Reversion to the Mean
Regression to the mean requires that after the balmy weather of February some balancing cold hits. So today New York and points both north and south along the eastern seaboard are having snow.
This shouldn't be that bad as it is not sticking in Manhattan, but my newspapers did not arrive this morning, except for the NY Times.
Regression to the mean is also boosting non-US shares in the stock market today after their shrinkage this month. Almost every foreign stock market index is up today, from Japan (even Toshiba) via Germany on news, to Canada, in part because the dollar has fallen after US employment data fell short of projections with only modest growth.
More for paid subscribers follows about this week's last day of trading from Hong Kong, India, Finland, Denmark, Belgium, Ireland, Germany, Britain, Finland, Mexico, Spain, Canada, Brazil, South Africa, and Egypt. We also have a company reporting today.
*There will be no portfolio updates on Sunday because my brokerage firm is “enhancing” its offerings which will require that its site shutdown, and because I am going to a Purim costume party (dressed in a British red-coat uniform I inherited from my father-in-law.)
I resolved my issue with Windows 10 going into white writing on black screen. It has been a persistent problem with the system at least since Windows XP. But since monopolies are inflexible, no action was taken except to post a vast set of instructions involving start modes for different operating systems. Although I had upgraded to windows 10, not happily, my laptop had been set up inWindows 8. In a normal world it is almost unimaginable that this lurking danger was not addressed clearly or prevented in the first place.
The main elevator in this building went down for the 6th time in 2017 and the service elevator was not manned, creating a security breach. Anyone who got past the door could go wherever destination he wanted to rather than the one given on entering the building. This breach could have been prevented by common sense.
I tried to adapt these insights to investing matters. I thought about the Snapchat ipo which, while was aggressively priced, drew a strong following, and then short sellers, and then another smaller following. These moves were generated by bellwethers leading the sheep to slaughter, mostly on-line alt news investment advice outfits. Herd mentality led to crowded trades costly to those led to them.
Some longs become shorts after planted, manipulative, misleading data. Today the hot news is that oil prices are back below $50 per barrel in US markets because of a glut of crude. US crude inventories surged by 8.2 mn bbls to a new record of 528.5 mn bbls at the end of last week. West Texas Intermediate fell to $49.2 at the crack of dawn today after falling 5.4% yesterday.
When supply of a major commodity suddenly turns you wonder if it could not have resulted from maniplulation. Gasoline stocks have hit a 27 year high.
Surprises with a different commodity are discussed for our subscribers below.
More for paid subscribers follows from Britain, Israel, Ireland, Australia, Canada, Sweden, Germany, Denmark, Finland, Mexico, Argentina, Brazil, Panama, The Netherlands, Colombia, Chile, Russia, New Zealand, India, and Hong Kong.
Today is International Woman's Day and as a senior citizen I am delighted that my sex is now being fostered. This was not always so. At my first job as a journalist, with McGraw-Hill in Brussels, where I wound up as acting bureau chief for Business Week a mere 2 years after joining the firm as a US hire, they sent an executive from New York to fire me for becoming pregnant, which moreover ended my company Blue Cross-Blue Shield medical coverage. I could have sued under Belgian law but was warned that if I did, I would never get another job in US journalism again. I wound up getting hired by a British competitor to Business Week, The Economist, before my daughter was born, and after we all moved to Paris.
There I ran into a different obstacle to equal rights, when a Radcliffe College friend, nee Livanos, and I, were denied the right to become members of the local Harvard Club by its president, an American banker. He headed what was then First National City Bank, a job with incredible benefits and little work, so it was possible that he didn't even know that she was a member of a wealthy Greek shipping family. The Harvard club president had to resign and return home to the US a few years later because of a scandal involving exchange control violations, and he had to give up his fabulous Paris expat lifestyle.
About 6 years later, having again been hired from the US rather than locally, again without job protection, I was fired again, this time by 60 Minutes, a part of CBS, and again by a Harvard man. My husband was in Iran after Khomeini had taken power and our daughter was in the American Hospital in Neuilly sur Seine with a serious and as yet undiagnosed illness (which turned out later to have been appendicitis, which Doctor Nodoh who was treating her insisted was not a possible diagnosis.) I was ordered to go to Italy with Barry Lando and refused because of her, and he fired me. (He was in France to avoid a libel charge over a program he had made in the US about the Vietnam war, and facing budget cuts ousted me.) This time I got smart and sued under French law and was awarded damages and pension rights and various other goodies thanks to a dual national lawyer with whom I had gone to high school.
And 60 Minutes and the whole CBS operation in France as set up to avoid French taxes became undone, costing the zealous defenders of ethical behavior further massive fines and legal trouble for years afterwards.
I met the McGraw-Hill man who had fired me years later and he apologized for not daring to risk his own career by refusing. Such, such were how things went in the 1960s to 80s.
Today's UK budget contained few giveaways: a credit of £2 bn for the stressed British social care budget and a special deal for helping small shops and pubs to pay their rates (local property taxes) when their earnings cannot. However there was no move against the online Amazon competition to local stores not subject to rates. Pubs and local tobacco sellers also were helped by no new “sin taxes” on drink and cigarettes beyond what had already been announced. The cigarette tax increase announced may further encourage smokers to quit as it is £7.35 per 20-fag pack, even higher than the level in New York State. Of course it encourages shopping duty-free or vaping.
There will be a new “sin tax” starting next year on soft drinks with more than 5 and 8 grams of sugar per 100 milliliters at 18 pence and 24 pence respectively, the money going to fund the Department of Education.
Meanwhile the tax free dividend allowance introduced in the last budget has been cut back. Higher taxes for national insurance were imposed on the self-employed and the rate will rise further in future years. Non-resident Britons will be taxed on their pensions. As the child of two German Jews whose later years were made easier by their German pensions into which they had contributed before they emigrated, I consider this a serious injustice.
More today from Britain, Canada,Finland, Israel, Nevada, Mexico, India and Germany. including a new stock pick.
Today's blog is delayed because for some mysterious reason my laptop switched from black on white to white on black, and I am unsure how to reverse this. Happily it doesn't port to the printer. But I am not sure what occurs on tthe website where I post my issues. But it is making it very hard for me to write, as I using the typing skills I first acquired in Middle School when girls learned typing and boys had shop.
It is annoying but part of the way our lives are constantly being intervered with by technology we do not altogether understand, a matter which I think is as smuch a part of the populist phenomenon as resentment of the supposed masters of tech who are ignoring the masses. Sometimes I am a part of the masses too, rather than of the supposed elite.
And learning from a WikiLeaks report that Central Intelligence Agency hacks into smartphones, computers, and internet-connected devices bring out my own hidden populist support for privacy. Including of course for candidates running for the Presidency, which is presumably why the Wiki leak came out now.
More for paid subscribers follows from Switzerland, Israel, Chile, Colombia, Argentina, Australia, Britain, Canada, Israel, Spain, Singapore, South Korea, and Japan.
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.