Global Perils

Thu, 2017/02/16 - 2:07pm | Your editor

A yellow warning light was illuminated today by BofA-Merrill after Fed Chair Janet Yellen's Senate testimony yesterday and the day before. She said it would be “unwise” to delay interest rate increases as the economy grows more strongly. The Thundering herd now thinks that the probability of a Federal Reserve interest rate hike next month has risen to 44%.

The stronger CPI which doubled to 0.6% in Jan. from 0.3% in Dec. and the nice 0.4% Jan. retail sales growth figure, both out today, further increased the odds on a Fed move to tighten. Year over year, the consumer price index rose 2.5%, hardly signalling a need for more stimulus, even though half of the rise was the direct or indirect result of higher gasoline prices. It's the other half which is worrying the Fed, particularly the fact that men's clothing costs rose by a record monthly amount.

US 10-yr Treasury notes are now yielding 6 basis points more than at the start of this week, luring in more foreign and US investors who also are adding to the upward trend of bond yields and the lower trend of both the dollar and bond prices.

The impact on stocks is the reverse. Costlier money and a lower Greenback tend to drive down share prices.

Inflation is coming to my business too. Paypal (now a stand-along company) will increase its transaction fees for online purchases from 3.9% to 4.4%. Moreover products sold across borders—including newsletters like my subscription one—will incur fees of 4.5% to 5% plus 30 cents.

All these new charges go into effect March 29. To avoid them, subscribers should renew early, before the notices go out. Our system is smart enough to tack your new subscription on to the end of your old one. And if you have been considering becoming a subscriber, do it now to save money.

Since we also pay come of our non-US based writes using paypal, to keep our contributors happy we have to also pay the higher fees for some of them. More about the problems of going global below fore paid subscribers along with news from Panama, Sweden, India, Chile, Argentina, Spain, Finland, Germany, Canada, Britain, Spain and Japan, including a reporting company.

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I Am Honoured

Wed, 2017/02/15 - 2:42pm | Your editor

Having grown up during the fiercest period of the Cold War, I can appreciate that another 70-year-old might want to try to restart US-Russian relations. In fact both George W. Bush and Barrack Obama had the same idea. But the shambolic mismanaged Trump Administration has so poisoned the air that the chances of working with Putin have now actually been reduced.

Russia has gained little in the end with its secret violation of the Start Treaty (which the Obama Administration tried to deal with quietly.)

Putin has gained little with his likely authorization of hacking of the Democratic National Committee and Clinton staff emails.

The Kremlin has not won any points after the Obama decision to expel its diplomats did not lead to similar expulsions of US ones.

Trump no longer can reduce pressures on Russia to exit the eastern Ukraine or even Yalta.

Russia actually lost rather than gained from its illicit links to Trump supporters and future office holders, who will now have to be purged.

So unlike Pres. Trump I don't think Vladimir Putin is smart. I think he is a KGB-trained thug. Unlike in Russia, Stalinism doesn't work in a country with a free press and an active opposition and institutions which cannot be cowed by firing people. Which happens to include the USA, Germany, France, South Africa and a few other places where Russia is trying to influence policy with secret deals and covert payments.

Team Trump threatens everything from vaccinations to educating our young, from supporting national healthcare needs, to letting people regularizing their immigration status to green card holds to children raised in the US after they were illegal sneaked in by their parents avoid deportation or bans.

And apart from Russia and the Muslim World, the Trump Administration has done a lot of diplomatic damage in its short term of office to date. A senior Mexican economist at the respected CIDE institute now says consumer confidence there is so low that there is a 35% to 40% probability that Mexico will go into a recession, according to Raul Anibal Feliz. The unprecedented drop in Jan. will cause slow-downs in manufacturing and services for the local Mexican market, he warns. He predicts that in the next few months, without a reversal, Mexican growth will fall to between 0 and 0.3% annualized.

 

*In its Feb.10th issue, Investor's Digest of Canada named Global Investing as “Letter of the Week” for my writing about the new US Administration and its confused relationship with Canada and Mexico over NAFTA. I am honoured. More on Mexico and Canada follows in today's blog with news from our portfolio companies including an annual report, plus musings about Norway, Russia, Israel, Brazil, The Cayman Islands, Japan, India, Finland, and Sweden. And about Edelweiss.

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Valentine's Day Misses and Missiles

Tue, 2017/02/14 - 2:23pm | Your editor

The Russians appear to have violated the 1987 Start Treaty by secretly deploying a land-based cruise missile in 2014. The Putin-smoochin' White House, which has just lost its National Security Advisor Michael T. Flynn for undisclosed links with Russian diplomats during the Interregnum, now has to deal with this Cold War-style challenge from the Kremlin. Mr Trump in his telephone conversation with Vladimir Vladimirovich seemed to think the treaty was called “Start-Up” and seemed to be pretty out of it as the Russian sought to get his agreement to extend the deal for 5 more years without stopping his land-based cruise missile program.

The Obama Administration tried to persuade Russia to stop the development of the missile, without success. You can also worry about China and North Korea making aggressive moves against the US and its allies.

Happy Valentine's Day. Coupled with hawkishness from Janet Yellen of the Fed, who said that there could be a rise in US interest rates soon, the Russian violation has taken down US markets after yesterday's bullishness. Foreign markets were mostly closed, except for Americas ones, when the news hit.

 

Today we have 2 quarterly results from companies using a fiscal year ending in March, one good, and one less so, along with upgrades on our latest buy pick and news from Canada, India, Finland, Germany, Britain, Israel, South Korea, Brazil, Australia, and Bermuda. We also have a couple of ideas which are hard to implement or which are better left to others.

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So-Called Justice

Mon, 2017/02/13 - 1:57pm | Your editor

The Trump “so-called judge” controversy is not new. What the President meant to say was “so-called justice”, a term used by his predecessor in the White House back in 1937 when his New Deal programs were blocked by conservative Supreme Court Justices. FDR sent a bill to Congress to add another six justices to the Supremes. He lost that vote because many Democrats opposed the measure which was locked in committee by Chairman Harry Ashurst who famously said: “No haste, no hurry, no waste, no worry.” It sat in the Senate Judiciary Committee for 165 days.

However, in the end FDR did get his way since one of the Supremes, Associate Justice Owen Roberts, switched his position to support New Deal measures like a minimum wage..The packing of the Court never took place the way Roosevelt intended, but the fact that it was even being considered caused the Supreme Court to take the law of public opinion into greater account, something which has characterized the third arm of US government ever since.

Current Supreme Court Chief Justice and swing voter John Roberts, no relation, studied under Owen Roberts. And Neil Gorsuch, the Trump nominee, studied under John Roberts. The Roosevelt attempt to control the third arm of government was defeated on constitutional grounds. The Congressional blockage of the Obama nominee last autumn was the closest we have come to a packed court since FDR tried it.

 

More including an important annual report follows for paid subscribers follows from Brazil, China, Spain, Germany, Israel, Canada, Britain, Switzerland, Mexico, Chile, Denmark, Bermuda, India, Australia, Denmark, and Finland. We also have a new pick from our new reporter today.

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Sunday Tables

Sun, 2017/02/12 - 1:21pm | Your editor

Today as usual I posted my tables showing how well we have been doing--which is quite well in our stocks, bonds, and traded funds. Our closed positions are not as lovely because I was taking losses last year on the assumption that a US tax reform measure from the new Administration would make losses less valuable in the future.

Everyone can see the closed-positions table on our website, www.global-investing.com. Use the printer-friendly button to view spreadsheets on your screen.

Today's chore was rendered more difficult by the decision of Barron's to leave out net asset value calculations on US closed-end bond funds invested outside the USA, the very ones we dote upon. Since the weekly's reporters frequently discuss the bargain prices of CEF against their NAV, this switcheroo cost me time and aggravation, as I had to use the more cumbersome Closed-End Fund Association site to do my tables.

Of course CEFs once they are operating do not advertise in Barron's, whereas the operators of exchange-traded and open-end fund do adevertise. However many fund management groups in fact operate in different market vehicles. So the weekly is being penny wise and dollar foolish in how it serves its subscribers.

More for paid subscribers follows.

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NAFTA and Currencies

Fri, 2017/02/10 - 1:48pm | Your editor

While I have many grievances with the new Administration I want to applaud a couple of smart moves. First of all, to get to talk to Xi Zinping, Pres. Trump agreed to recognize the decades-old “one China policy” which labels Taiwan as a breakaway part of China rather than an independent country. After his intermediaries with Beijing (Ivanka Trump and his grandchild, who attended a Chinese New Year party and then talked to Xi's advisers on behalf of the president), the important phone call could take place.

He appears to have walked back from his extreme support of West Bank settlers and to be preparing the ground for a new round of peace talks between Israel and some of its secret supporters among Arab countries, including Saudi Arabia and Egypt. The Middle East thicket is not susceptible to one-liners on Twitter and the new Secretaries of Defense and State have now reined in their boss.

I expect the Two Secretaries will also take in hand the dangerous love-feast between Trump and Putin. While a restart with Russia obviously makes sense (it was attempted by both of the previous US Presidents), it requires expertise which Pres. Trump lacks, despite his having had two wives who speak Russian (Ivana and Melania, both of whom learned Slavic languages as children which gave them a head start when they had to study Russian later.)

Our relationship with English-speaking foreign countries is now marginally less fraught as official talks with Canada and Mexico are taking place at a sherpa level to prepare a summit.

More significantly still, in order to get US infrastructure up to scratch, the Administration is working to create laws to public-private cooperation which build on the venerable tax-free bond issuance for needed finance with more modern variations.

And our rickety tax system will be reformed, which should help investment even if it doesn't do much for Trump voters.

I am a supporter of the fiduciary rule for retirement accounts, to make sure advisers put their customers ahead of the placements which pay off the most for the advisers. But this is an issue in all financial advising, and the 180-day delay may lead to a more general fiduciary rule by the SEC.

There are stock market implications which result from these few smart moves by the new Administration, discussed below. Today's market is mainly reacting to currencies where there are winners and losers.

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The Rich Are Different

Thu, 2017/02/09 - 1:58pm | Your editor

To quote F. Scott Fitzgerald, the rich are really different from you and me, among other things in their friendships. First daughter Ivanka Trump was the legal guardian for the two daughters of Rupert Murdoch and his divorced wife Wendi until she resigned after her father won the White House.

To marry Aristotle Onassis, Jacqueline Kennedy turned down the widower Lord Harlech, the former British Ambassador to Washington and a close friend of JFK.

A personal aside. While Onassis had a troubled daughter who did not appreciate her stepmother, Lord Harlech had one too, Jane Ormsby Gore, whom I got to know in London. Jane was then the shocker of the establishment, attending a hunt ball wearing a gold brooch on her gown in which a large live beetle was imprisoned. She also publicly smoked pot, then illegal.

Jane, whose mother had died in car crash then lost her father in a different car crash. She later married and divorced Michael Rainey, who made clothes for the Beatles (the singers.) Now she is an interior decorate in Wales with a very conventional style.

Wendy Deng's two daughters, now teen-agers, are only getting started. They recently holidayed in St. Barts with their mother, who is nearly 6 ft tall, and her Hungarian male model friend, 21, who presumably was under strict orders not to molest them.

 

It may be a bad sign. One of the two local supermarkets serving me (and Melania Trump, assuming she buys food for her self and her son) is a Whole Foods and I have been buying more there now that they have stopped their price gauging (after two other local chains, Food Emporium and d'Agostino, shut their stores near here, in the zip code which gave the world the Trump Tower.) Now after another lousy quarter, Whole Paycheck (as it is called) will join up with Dunnhumby, a private consumer data collecting sub of Britain's Tesco supermarket chain (TSCDY, sold). The data will find its best customers and market to them by personalized offers. I have never spotted the First Lady in the supermarket, only at the polls at PS 59 Man. Her son does not attend the public school.

 

Today's blog is scant and short because my cable internet connection has been slowed down by a blizzard. This may have boosted one of our shares, discussed below.

 

More for paid subscribers follows from Canada, Japan, Britain, Brazil, Sweden, Australian, Chile, Israel, Mexico and a few other places. We have reports on two of our industrial companies to start with both of which are in good form.

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Hacked by IR

Wed, 2017/02/08 - 1:54pm | Your editor

I got an e-mail message sent to my corporate address from a firm specializing in fund investor relations, called Pristine Advisors. It bore the curious subject line: Fwd: new sign-in from Chrome on Mac. It read:

“Several attempts to login to your account ID with incorrect login details was blocked.

“You are receiving this email as you are subscribed to office 365.

“To keep your account secured, it is important you Validate your ID.

“We may temporarily limit your account if you fail to act.

“Outlook Team

“Office 365”

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The Day After

Tue, 2017/02/07 - 2:20pm | Your editor

Today I am following up on my bulletin published late last night about one of our companies. But before we go global here are my latest remarks about Washington DC.

Good news about the fiduciary rule, which requires that people buying retirement products be given the most suitable ones rather than the ones which pay off best for their advisor. The Trump Administration has quietly dropped the plan to repeal this measure which is due to go into effect in April. It does however want to move the oversight of pension supplement advice away from the Department of Labor and to a part of the government more familiar with investing, which sounds reasonable to me.

There is also bad news about the confirmation of Betsy de Vos on which the Senate is due to vote about right now. After an all-nighter filibuster only two Republican senators voted against her appointment as Secy of Education, despite her ignorance and personal financial intersts in profit-making schools.

Ms de Vos in the hearings appeared to know nothing about programs requiring that children with disabilities be mainstreamed, and she argued that guns should be allowed in schools and their play areas in case of attacks by grizzley bears.

VP Michael Pence got to cast the deciding vote to get her named, the first time in US history this has happened over a cabinet appointee. For whatever it is worth, de Vos and her family are major donors to Republican candidates. And for whatever else it is worth, I am sister-in-law, mother-in-law, aunt, and cousin to a half dozen teachers in the public school system, as well as a graduate of the New York City school system (unlike President Trump who was sent to boarding school for his education.)

 

*JP Morgan today advised shorting the dollar as its analysts wrote that “confidence is being eroded by erratic policy emissions from the White House.” The bank team noted that the Greenback has retreated 45% from its high right after the election of Donald Trump. It advises buying Swiss francs and yen.

We think it makes more sense to buy stocks and bonds in currencies likely to become a haven as the dollar sells off.

More for paid subscibers follows from a reporting company, and news from Israel, Australia, Bermuda, Finland, India, Britain, Eastern Europe, Brazil, Canada, Germany,  Russia, the Caymans, Australia, Switzerland, Hong Kong, and Mexico.

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Bulletin

Mon, 2017/02/06 - 5:42pm | Your editor

Today a CEO at one of our companies was fired, as I have been preaching for a couple of months. However it is still too soon to crow. More on this for paid subscribers below.

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