Election Day

Tue, 2017/09/12 - 1:03pm | Your editor

The phone man came and tested the lines and then went away again. He will let me know by cell what is going on with our lines which are copper running through the sewers.

Today is Election Day for the party primaries in New York City and I will vote after I blog. The last time I voted was last November when the poll site, a local public school, was invaded by Donald and Melania Trump with cops, secret service men, TV cameras, and lots of press in tow. This time it should be more sedate as the vote for my half of Sutton Place will only be between the incumbent on the City Council and his two challengers. The other half of Sutton Place is in a differeant electroral zone and there are 10 candidates for the Democratic nomination and only one, unchallenged, for the Republican one. We also get to vote for the mayorality candidate but De Blasio allegedly has it sewn up mainly because he raised far more cash than the challenger from my fair city's real estate moguls, not of course including The Donald.


More for paid subscribers follows from Argentina, Brazil, Britain, Canada, Chile, Germany, Ireland, Israel, Mexico, Paraguay, Sweden, and Uruguay, including a company half yearly report. We start with funds for a change.

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An Anniversary

Mon, 2017/09/11 - 2:24pm | Your editor

A speculative stock gamble we advised taking last week has paid off already, and what to do now about this share is discussed below.

Before moving on to the big good news today, we need to remember what happened here 16 years ago and to think about how to help the people of Houston and the Caribbean areas and part of Florida hit by Hurricane Irma, now reduced in horribleness to a mere tropical storm but still deadly.

Having watched the impact of new price cuts on my local Whole Foods market I was not surprised that supermarket analysts found that the post-Amazon shopping at the US branches of the chain rose 25% after is stopped being “the whole paycheck”. The world of supermarkets will never be the same. When I was a child in Manhattan, the local general grocery stores were wiped out by Great A&P, now bust, while specialists selling delicatessen goodies, real bakeries, fishmongers, and Kosher butchers survived. I expect that in areas with dense foot traffic will see the same pattern, but whether it will work nationwide is not clear.

More from Australia, Bermuda, Brazil, Britain, Canada, Chile Denmark, Germany, Hong Kong, Portugal, South Africa, Spain, Sweden, Switzerland, and the USA.

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Sunday Tables Posted

Sun, 2017/09/10 - 3:02pm | Your editor

To all my readers in Houston and around Florida my thoughts and prayers are with you. My only problems are that a sewer fire took down our telephone lines--but we still have cellphones.

I just posted the Sunday tables at www.global-investing.com which may be viewed on our site. Everyone gets to see the closed-positions table but only current subscribers may view our current holdings of stocks and bonds, closed-end and exchange-traded funds, and our current advice. The internet was also verrryy slloow.

There is need for a footnote for the public table, which only shows part of the proceeds from the sale of Stada Artzneimittel paid by Cinven of Britain and Bain Capital of the US so far. Because of a hold-up by Elliott Mgm.' Paul Singer, our buyer funds had to pay 8 euros 40 cents more per share to get control of the company, and under German law we have to get that sum as well along with a promised final dividend from STADF. I have a confirmation from my broker that this is coming, but not yet how much it will be in US$s on the day it hits.

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Midtown Manhattan Out of the Loop

Fri, 2017/09/08 - 1:49pm | Your editor

The phone outage turns out to be general in the East Midtown area even including Trump Tower, where luckily the President's family no longer resides. The rot is also affecting Queens reached by a bridge near my office. They promise service will resume by Sept. 18. I am not sure I can manage that long with only a cellphone.


Meanwhile the dollar has hit a 32-month low against the euro despite the Trump deal with the Democrats to kick a debt ceiling vote down the road. It may just be hurricanes but my theory is that money men fear Pres. Trump no longer expects to deliver the tax cuts they are waiting for and are placing their bets on the European Central Bank rather than the Fed to next raise rates or at least cut stimulus. The Portuguese 10 year bond is up 7 basis points because the market expects other yields to rise, but not Lisbon's where the bank bailout fund is again being tapped.


Given the phone situation, I am again filing very little. I cannot phone up to reach sources as I need to keep the cell line open for emergencies and the telephone company. My internet is also affected, possibly because of the huge leak reported by Equifax where we have some accounts. I feel like I am visiting Third World countries like China and Egypt. It sure feels like then end of civilization as we know it in Manhattan.


The data breach affects about 45% of the US population whose social security numbers and driver's license data has been hacked. Equifax knew about this in July but waited to tell the world apparently so its top brass could seel shares.


The environment isn't helping any. Apart from Irma, we have had a huge earthquake offshore southern Mexico, mudslides in the Swiss Alps, and fatal flooding in India, Bangladesh, Pakistan, and Myanmar. More today from Mexico, the Dutch Antilles, Britain, Israel, Spain, Finland, Ireland, Denmark, Switzerland, Colombia, Brazil, and South Korea.

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No Ding Dong

Thu, 2017/09/07 - 1:58pm | Your editor

I had an aunt named Irma. I had a childhood friend named Harvey. I have a cousin named Sandy. I think all these hurricanes have something to do with my relatives. But luckily I have no relative named Katrina.

I reflect on these connections because both our telephone lines are down today, which has never happened before. Given the constraints I am putting out an emergency blog today with a limited amount of news, as I cannot confirm anything coming in on the Internet with a phone call. I have to leave my cellphone available to get the telephone company repairman in. It reminds me of nothing so much as France in the 1960s. We managed to garner news from Canada, Chile, Argentina, India, Australia, Britain, Brazil, Russia, France, Sweden, Finland, Germany, Bermuda, Denmark, and the USA, despite the phone service being cut off.



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Europe Plans Internet Crackdown

Wed, 2017/09/06 - 12:34pm | Your editor

Just as Amazon announced that it would build its first fulfillment center within the New York City borders (in Staten Island, a part of my city), other internet giants faced new tax demands across the pond. Reuters reports from Tallinn that European Union finance ministers next week will discuss rule changes aimed at increasing taxes on digital multinationals such as Google and Amazon. The on-line giants face pressure in Europe to pay more taxes. It is hard for a single EU country to boost its taxes because existing rules limit the taxation rights to the countries where companies are physically present, giving digital firms an edge against physical vendors.

The informal meeting of finance ministers will be held in the Estonian capital on Sept 15-16. The paper which was seen by Reuters' correspondent proposes a reform of international tax rules to change the concept of "permanent establishment" so that digital multinationals can be taxed where they create value, and not only in countries where they have established their tax residence. It comes after several EU countries began negotiating with large digital companies for the payment of back taxes. They face legal hurdles in collecting payments. This summer a French court said Google did not have to pay euros 1.1 bn ($1.3 bn) in back taxes demanded by French authorities because it had no "permanent establishment" in France as Alphabet ran its French operations from Ireland.

Under the Estonian proposal, even without physical presence, large digital businesses would be liable to the corporate tax of the countries where they make profits. A "virtual" permanent establishment would be enough to justify taxation. It goes further than existing tax principles agreed at international level by members of the Organisation for Economic Cooperation and Development, which includes EU states, the USA, Japan and other rich countries. It is also more ambitious than proposals currently discussed at EU level to tackle multinationals' low tax bills, such as a common corporate tax base.

Any single one of the 28 EU countries has a veto on tax matters and several have blocked crackdowns in the past. To avoid a quick backlash, the Estonian presidency is proposing to discuss the issue in the coming months to reach a common position before the end of the year.

Canada today raised interest rates to a whole number, 1%, meaning deposits earn 0.75% while loans cost 1.25%. And the most international member of the US Federal Reserve board, Stanley Fischer, who formerly headed the Israeli CB, is resigning for personal reason next month, which will give Pres. Trump a chance to change the makeup of the Fed.

Thanks to the spate of hurricanes, the US debt ceiling was raised today by Pres Trump and Congressional leaders, until Dec. 15, so gold is down and the US$ is up, hurting all our non-dollar positions.

More follows for paid subscribers from Israel, Canada, India, Brazil, Denmark, Kenya, South Africa, Spain, Britain, Ireland, and Ethiopia.

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Reacting to a Norwegian Warning

Tue, 2017/09/05 - 1:57pm | Your editor

Here is something to worry about besides the risks of a confrontation with nuclear weapons between Kim and Trump. The Norwegian wealth fund has decided that it will only buy corporate bonds denominated in dollars, sterling, or euros, and for a term of no more than 10 years under its new performance benchmark published yesterday. So the managers of the oil wealth investments are forced to avoid bonds denominated in other currencies, even the Norwegian one, as they place some of Norway's $990 bn portfolio. Behind this Viking move, is the realization that the gains from broad international diversification are not worth the risk for bonds and fixed income investment. It is not the same as for equities, where diversification cuts risks.

“For an investor with 70% in an internationally diversified portfolio, there is little reduction in risk to be obtained by diversifying his bond holdings across a large number of currencies,” the fund wrote in its letter yesterday to the Oslo Minister of Finance, published in today's Financial Times. What works for stocks does not work for fixed income, writes another mentor yesterday:

“In most major markets, credit growth and property prices, which often tend to be destabilising, have been reasonably well-behaved relative to nominal GDP growth. The situation in smaller advanced economies, such as Canada and Australia, and a number of EMs [emerging markets] is different. They have experienced more intense expansionary financing phases. There is evidence tha the EM credit cycle is in a state of excess and thant some EM economies, including China, are now at high risk of financial crisis.

“The vulnerability of the EMs is deepened by large overseas holdings of their debt and their extensive issuance of FX-denominated securities. Some 25% of EM debt is foreign-owned, while EM external FX-debt stood at around 12% of GDP in 2016, up from 10% in 2007, although lower than the peak of [over] 18% before the 1997 Asian Crisis. Dollar debt in the past played a big role in EM crises, either as a trigger of a sudden capital flow 'stop' or as an amplifier. The combination of depreciation [vs] the US dollar and higher US dollar interest rates has proved a poisonous cocktail.

“That said, it could be argued that the EMs are better protected against 'sudden stops' in capital inflows than in the past. Flexible exchange rates are more common, and current account deficits have fallen in a number of economies, partly because of cyclical reasons. The shortfalls in Argentina, South Africa, Turkey, and Egypt remain [a] concern.

“Countries have accumulated sizeable FX war chests, although these have recently begun to fall. Oil exporters' FX reserves have dropped to a 10 year low.

“The threat of EM trauma is increasingly pertinent from a global perspectives. The EMs today account for almost 60% of global GDP, 36% of world exports, and 86% of the global population. Since the [global financial crisis] their contribution to global growth has been [about] 80%.

“Financial globalisation has made asset markets increasingly inter-dependent. About 70-80% of equity and foreign exchange returns in both advanced and emerging market economies are attributiona to international factors. Financial spill-overs are the norm, not the exception. The is evidence of [more] spill-overs from EMs equity and foreign exchange markets. Between 30% and 40% of the variation in advanced and EMs economies stock returns and exchange rate fluctuations can now be explained by EMs financial markets.”

So writes Russell Jones today in a note on financial fragility and excess, published by Llewellyn-Consulting.com from London. Given that we have just recommended buying a fund invested in high-risk emerging markets and other below-prime debt, I am quoting Mr Jones to explain my logic. We are exposed to this paper even if we are not investing to get its high yields. So with a well-managed closed and fund trading (as they do) at a discount from net-asset value, at least we are getting some of the yield from the global exposure to high-risk paper. More for paid subscribers from Germany, Australia, Brazil, Canada, Britain, Mexico, the Dutch Antilles, Israel,  India, and two items from Colombia.

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A New Fund

Sun, 2017/09/03 - 4:56pm | Your editor


 I had hoped to wait until Tuesday to write up my latest fund pick, but my paid subscribers are clamoring for more information Sunday. So here goes. I have picked a very free-ranging fund with experienced managers and a good track record for higher yields--which even in this case do involve higher risk than more sedate funds with narrower mandates. Read more »

September Is On

Sun, 2017/09/03 - 11:51am | Your editor

The tables have just been posted at www.global-investing.com

We are showing the closing prices on stocks as of August 31 rather than the following day but because of data issues I could not do the same for exchange-traded and closed-end funds, and in fact there are many gaps because of the long weekend.

We have a new buy recommendation for paid subscribers for next Tuesday posted today. Join them to follow our current picks and make money.

I can confirm that Tom Herzfeld is in the process of creating a new Cuba Fund but have no idea how it will be structured. Tom, a Florida-based expert on closed-end funds already tried once before to do this, but was frustrated by the embargo. I have no recommendation at this time because all I know is that he told the SEC of his plans--not the rest of the world.

I'm off to a Chinese lunch as is my usual practice on Sunday. And tomorrow I will lie in. I actually went into labor on Labor Day nearly a half century ago. The obstetrician was on the golf course because he figured the baby would take longer, but I knew any child of mine would like a pun. The toubib came back from Normandy to try to collect his fee but our baby was born near Paris before he made it to the clinic.

The Jewish holidays this year will result in only one day when I will not be filing, because Yom Kippur falls on a Saturday. It cannot all on a Friday or Sunday so the rabbis cheat and make it fall on the Jewish Sabbath if there is a treat of that.

An important coincidence in 2017 is that the lunar New Year will be shared this time around by Jews and Muslims. That doesn't happen often. The Islamic year is shorter than the solar year because unlike the ancient Hebrews, the Prophet Mohammed did not accept the Babylonian invention of leap months to make up the difference. In the Arab heartland, the fact that in many years the pilgrimage takes place during the hottest month in Arabia makes Islam a tough religion to follow.

Also the sighting of the New Moon is not adjustable in Islam, as it is in Judaism to avoid having to prepare or recover from a fast on a Sabbath.

I think along with defining Jihad better, and stressing that murder is murder, the ulemas should correct the Muslim calendar, as indeed the Christian world did in the 18th century with, except for a few Russian Old Believers, worked out fine.

They should do this in Whitby in eastern England.

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The Stada Saga

Fri, 2017/09/01 - 1:57pm | Your editor

After a series of perilous mailings and conversations I have persuaded brokers Charles Schwab to keep an eye on developments at Stada Artzneimittel, STADF, which we tendered to private equity group Bain Capital of the US and Cinven, a UK hedge fund.

They only collected 63.5% of the shares and under Germany;s Beherrschungsvertrag law, in order to take control of the company board they need 75% of the shares out; and to delist it even more. The takeover bid at euros 5.3 bn barely scraped through last month after a June bid fell short. After that the former board were all replaced.

It is always fun when an obscure hard-to-follow stock I found for my readers is subject to a bid. This year it has happened several times, twice in Canada, once in Britain, and once in Hessen, the German province from which my parents escaped to the USA from the Nazis.

Taking advantage of this close win, US hedge fund Elliott Partners, run by Paul Singer, is attempting to force the two victors to pay a premium to collect another 11.5% of the STADF shares it holds for ransom. Its deadline is today. If Singer, a well-known Manhattan supporter of right-wing Koch Republicans and hard-line Israeli politicians (which he offsets by also supporting gay and lesbian rights) gets a premium price for his Stada shares during the next calendar year to August 22, we also will be get the additional amount for the shares we already cashed out. Singer is also opposed to passive index-tracking investment for “devouring capitalism” which is something I agree with.

Stada, a large maker of copy-cat drugs for Germany and the world, first came to my attention some years ago because I thought it might become a target for Teva, the Israeli firm. Listed in Frankfurt, its shareholders were mostly medical and pharmaceutical professionals who doled out its products in Germany.

The German public tends to be distrustful of stock markets in part because they are run by large banks as the brokerages which used to operate in Frankfurt before Hitler's rise were often Jewish-owned (two by uncles of my father) and no real replacements exist except a bit in Bavaria. So apart from those with a professional knowledge of a sector, like drugs, individual investors are rare in most of Germany, and very mistrustful of funds and foreigners.

Still, the Stada saga is extraordinary. The current board are all resigning; the prior board was denied “quittance” (legal immunity) by the ones resigning, Stada is about to name a new CEO, generics pharma industry veteran Claudio Albrecht, according to Bloomberg, who will be the 4th CEO of Stada in 2017. The first to go was Hartmut Retzlaff, who had long headed the company whose HQ was near Frankfurt, officially for health reasons. He also was known to be opposed to a sale of Stada.

His successor Mattias Wiedenfels then fired advisors and cut the powers of Retzlaff's son ostensibly to save money in Stada purchases raw pharma materials and made drugs.

But another reason for the CEO switch was because an investor, Active Ownership Capital, sought to sell Stada to Bain and Cinven. New CEO Wiedenfels, who is about 40, discovered that his phone was being tapped, there was a hidden microphone in his car, and he was sent photographs of himself in public or private situations to threaten him against the talks with the US and UK funds. This was reported by Manager Magazin in March, according to FiercePharma.com, a daily blog on the industry.

At this time other potential buyers of Stada came forward: the usual Chinese buyers looking for foreign boltholes to buy; Mylan Pharma, which was trying to protect its own operations from hostile takeover bids, and a Boston private equity fund, Advent International, specialist in healthcare investing. Advent offered $3.7 bn for the company and was told to do better. CEO Wiedenfels crafted a plan to cut costs and increase sales and earnings with a cashflow target by 2019 of euros 570-590 mn and a sales target fo euros 2.65-2.7 bn.

A first offer came from Cinven and Bain at euros 5.32 bn, then about $5.63 bn, much higher than Advent's offer and a 49% premium over the trading price. It finally came out in June. The pair needed 67.5% of the shares to be tendered and only 65.62% of the holders agreed to sell at euros 66/sh. Reaching smaller German holders of Stada in their drugstores and medical offices was difficult, but the process was made more complex by the German rumor mill which focused on the alleged share ownership by Harvard professor Andrei Shleifer.

Shleifer, both Russian-born and Jewish, was a protege of Harvard Pres. Larry Summers. Shliefer was convicted of having defrauded the US government during this period because of conflict of interest during his term as the chief US advisor to Russian privatization programs during the 1990s. His fine was $26.4 mn which Harvard paid during the Summers presidency in 2004, while Prof. Shleifer himself only paid back $2 mn in damages. (Summers wound up fired as Harvard president in part because of paying the fine.) A specialist in behavioral finance, Shleifer salvaged his Harvard career and his wife, Nancy Zimmerman, source of the conflict of interest, now runs Bracebridge Capital. It reportedly supported the bidders from Bain and Cinven both times.

German shareholders were told that Bracebridge was involved in Stada's buy of the US generics business of Mova Labs (of New Jersey) in 2001, Mova's sale to private firm Dava Pharma in 2006, and later Dava's sale to Endo International plc, each time at a higher price- which left the German Stada owners furious. I have no confirmation of any Bracebridge played in these events but a private equity fund typically will buy private unlisted companies such as Dava was.

Now active in investing for the endowments of US universities including Princeton and Yale (but not Harvard), no link can be found between Stada and Bracebridge. But during the first unsuccessful round by Bain and Cinven, the pair agreed to “provide financial and strategic support for possible acquisitions” by Stada and they are in the same business of buying companies, taking them private, and selling them later at a profit.

The second takeover vote was favorable to the bidders because non-German owners of the shares (including me and my readers) tendered while Germans held back. Throughout the bid period the chairman of the Stada supervisory board which refused the “quittance” was Carl Ferdinand Oetker, a member of the Dr Oetker baking powder family which had supported the Nazis, but who himself had begun his career at BHF, a former Jewish investment in Frankfurt, founded by the legendary Carl Furstenburg. He has resigned along with the rest of the board. More (and more sedate) pharma news below for paid subscribers.


There will be no blog Monday as it is a US public holiday. I will be preparing my close-of-month stock tables today with yesterday's prices.


Louis Navellier, a newsletter writer and fund manager, was charged by our SEC with fraud for false track records overstating investment gains by managed funds at the Reno firm. Your editor just wrote a comment on stockgumshoe.com about a Navallier recommendation in the lithium frenzy, pushing one of our foreign companies discussed below; and more news about Mexican companies dealing with the Houston hurricane. I do not manage any money except my own, because I want to benefit from the First Amendment protection of press freedom.


More for paid subscribers follows from other countries but more from Germany: a relic from the Portuguese past in Brazil; Danish drug-makers and others; Latin lithium miners; Hong Kong Internet powerhouses; and a few notes about Houston and Mexico.

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