Court Rulings, A Stock Pick, A Scandal,

Fri, 2015/05/08 - 12:48pm | Your editor

Adrian Ash, our gold advertiser for, commented on the UK election:

“The price of the UK Conservatives' overall election win looks around £10 per ounce so far.

"That's how much the gold price in Sterling sank as the pound jumped on the FX market last night when exit polls released the moment the voting closed at 10pm (Greenwich mean time) showed how political forecasters make even internet pundits look respectable.”

Although my husband's postal vote in the Tower Hamlets constituency did not help the Conservatives win the British parliamentary election (Labour won the seat), he is delighted at the Tories' unexpected majority after yesterday's poll. We are also pleased that the UK Independence Party failed to get more than one seat, despite our Stockwell friend (who used to work for Nelson Mandela!) tossing his vote to the sole black UKIP candidate. Pollsters totally failed to spot the trend in England but did better in Scotland.

The main British poll lesson: vote strategically in a “first past the post” system. With every British stock up today and sterling at $1.555 we are benefiting in our portfolio apart from gold.

In proportional representation countries, you can waste your vote for oddball candidates who then get to push for extreme policies, in Israel for example. The Jewish state was founded by progressives who wanted the latest thing in democracy, and didn't copy the system of the mandate country, Britain.

Here is a comment from an Israel capital markets fund specialist, Bruce Schoenfeld, who directs research at BlueStar Global Investors. He called the coalition created at the 11th hour by Binyamin Netanyahu “not an ideal outcome” citing the very narrow one-vote majority Likud cobbled together as “unstable” and “not an ideal outcome.” He worries that it is “more right-wing” than the previous govt.

Most damningly, he noted the “high cost of building the coalition”, first by rolling back “progress on religious labor force participation” and the likelihood of reversal of the court order last year requiring “Torah students” to serve in the Israeli army. He cited as well financial costs, the 8 bn shekels of 'sweeteners' given to induce parties to join the coalition” in addition to skewed cabinet and Knesset committee weighting.

Yet, here too, we are benefiting from an outcome I loath as a progressive Jew, a civil libertarian, and peace-loving supporter of the Jewish state. Read on.

More for paid subscribers from India, with our promised new stock pick from Abhimanyu Sisodia; Britain, Israel, Switzerland, Colombia, China, Hol-, Fin-, and Ire-land, Mexico, and South Africa.

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Another Heavy Thursday for Reports

Thu, 2015/05/07 - 12:03pm | Your editor

The market rout continues outside the US after Janet Yellen popped a bubble in US stock markets and European yields rose from asset purchases to prevent deflation. Today we are awaiting results of a fraught British election. And then there is Greece. So let me change the subject.


Your editor first met J. Mark Mobius in a graduate seminar examining the link between political systems and economic growth run by Barrington Moore of Harvard's Russian Research Center. Being a mere undergraduate, I got admitted to the course by Moore and Mobius, then a PhD student down the road at MIT was also admitted. Already then Mark had almost no hair.

We had a few things in common, both being the NY-born children of German fathers. After he got his doctorate his first job was marketing dairy products in northern Thailand. After 1987, when he went to work for tax exile Sir John Templeton, Mobius got back familial German nationality to exit the US tax rolls, something I never considered. But his family were Christians, not Jewish refugees. I met up with him over the course of his brilliant career as an emerging markets guru, usually in Hong Kong.

Now at 78, Mark is retiring from a hectic and demanding job visiting companies some 250 days per year and managing 50 managers, analysts, and researchers at the Templeton group. One reason, Bloomberg says, is underperformance of the Franklin-Templeton Group in the developing markets arena. Unlike the norm in LDC funds, his key closed-end fund, Templeton Emerging Markets Fund, EMF, is based on stock picking rather than index tracking, which I consider a plus. It is overweight commodities and underweight tech. This doesn't mean Mark hasn't done well. Over the nearly 30 years he had run emerging markets for Templeton, his return has been over 3000%.

One reason to favor India as Mark did is that it can play catch-up. Today it passed a move toward a single market in goods and services by a single national tax passed by its Parliament as a constutional amendment. Tomorrow we will have a new stock idea in India from our reporter there.


More for paid subscribers follows from India, Canada, Myanmar, France, Britain, Finland, Ireland, Spain, The Netherlands, Germany, Mexico, Colombia, Brazil, Panama, Hong Kong, and a few other places.

As it is Thursday we again have a heap of quarterly reports to cover so this blog is late. I also had to deal with a 4th attempt to admit an appliance repairman to my apartment.

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Drugs and Other Businesses

Wed, 2015/05/06 - 12:20pm | Your editor

The Wicked Witch of the East has attacked Germany which is suffering tornadoes today. Next what with global warming there will be hurricanes in Hereford and Hampshire.

The Society of Quantitative Analysts on May 15 will hold its “Fuzzy Day Conference” to examine “'facts' that are not facts” and “truths that we take for granted” and that are not true. Among the subjects the quants will hear about is whether the US dollar is really a safe haven or whether this is a myth.

They will also examine one of my bugbears, whether the current method of calculating 'annual volatility' by using the monthly standard deviation is really right.

And underlying the whole exercise is concern about whether interest rates can remain negative for an extended period and what the consequences might be. In theory (and now wrong) there is a lower zero bound on interest rates. Nobody would lend for a negative return because you could simply stuff your money under a mattress. Hard cash doesn't lose value over time ever. Yet there now are countries—the Eurozone countries like Germany and Spain, Switzerland, Sweden, Denmark—where people or institutional investors are happy to lend out money in exchange for getting less back later. The central banks of Europe, Switzerland, and the nordic countries have pushed interest rates into negative territory. There rentiers do not collect rent on their money. Instead, they pay money to the borrower for the privilege of giving him money in return for getting back less than the amount of the loan after some period of time.

One result is that pension plans or insurance products which require return on capital are being wiped out. Apart from a suicidal pilot, Lufthansa faces a huge pension deficit which means its retirees won't get the money they bargained for.


Your editor was again quoted in Investor's Digest, the Canadian version of Barron's, about Bank of Nova Scotia aiming to boost Canadian interest in stock markets. More on this below in two items, on a Canada fund and on which stock Canadian novice investors will be urged to buy.


More for paid subscribers from Britain, Spain, Brazil, Colombia, India Belgium, Australia, the Netherlands, Israel, Canada, and Ireland.

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China Down, Others Up

Tue, 2015/05/05 - 12:01pm | Your editor

The newly posted summary of our performance YTD by Hulbert's Financial Digest shows that we are back in the black vs US indexes. Mark Hulbert tracks newsletter performance for Dow-Jones.

Euroland growth estimates by the European Commission were raised to 1.5% for this year, from 1.3% earlier, a big boost.

The European Central Bank meanwhile hit its target of €60 bn in quantitative easing in April. Holdings of government and supranational bonds total €95.1 billion, with the weighted average maturity at 8.25 years, down from 8.56 at the end of March.

Eurozone factory gate prices rose only 0.2% in March from Feb, and fell 2.3% annualized.

My skepticism yesterday on Bill Gross's “bond short of the century” (German long-term euro bonds, or Eurobunds) is widely shared. Here is Hans Mikkelsen of BofA-Merrill Lynch on the strategy being promoted by Gross. He writes:

“One key reason for the recent increase in US long term interest rates has been surging German rates - unwinding a big source of downward pressure on US yields. With today's further increase in yields (+13bps to 0.99%), 30-year bund yields increased 53bps over the past two weeks. For the typical high yield bond with a duration of 4.4, a 53 bp increase in yield would imply roughly a 2.3% decline in bond price - or the equivalent of about a third of a year's worth of yield. However, at their peak two weeks ago 30-year bunds had duration of 23.7. Hence 30-year bund prices have declined approximately 12% over the last two weeks, or roughly 25 years worth of yield!”

Ex-Swedish Finance Minister Anders Borg wants its CB to intervene to avoid a “significant risk” that the krona will rise too much vs the euro. The Riksbank left the benchmark interest rate at -0.25% last week, which boosted the krona 0.9% against the euro in 3 days,to 18% higher than ibefore the global financial crisis.

China's stock market fell today. We will be writing about Indian and Latin industry instead.

Here is what else is happening, according to our advertiser Adrian Ash of

Australia's trade deficit was worse than expected in March, as its CB cut interest rates to new record low of 2%. France's government deficit was smallest for March since before financial crisis. Spain's jobless level fell at a record pace for April, way better than analyst forecasts. UK construction sector slows rate of growth but still strong.

We have news from Israel, The Netherlands, India, Britain, Brazil, Mexico, Colombia, and Denmark. starting with a quarterly report:

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New York Note

Mon, 2015/05/04 - 1:15pm | Your editor

Our return to the canyon of Manhattan has proven particularly fraught this time. First of all the internet is down in my office but luckily it works in our apartment where I have taken over the household computer from my husband. My system is from Time Warner which is back on its own after the takeover bid by Comcast was ended on competition grounds.

Then too property value in our largest single holding—our apartment—is under threat from various sides. The coop board election, which took place during our absence in Europe, was apparently stolen by Stash, the Chicago-born board president, to stop any move against his use of the building's capital account and construction budget to enrich himself. Proxies went missing. The dead voted. Obscure rules were cited to block other dissidents. All very like Chicago in the old days.

Getting out from under the lawsuits and grand jury investigations that will require mayl boost our charges for maintenance both in our home and in my office, a maid's room in the same building. Lawyers don't come cheap. It also means bad blood in the elevator with supporters of the board and dissidents staring into opposite corners and making faces at each other.

Moreover a 90-ft building is being planned around the corner from our Sutton Place home. This will be another of those Midtown skyscrapers for newly wealthy oligarchs from abroad, to the detriment of neighborhood quiet, security, tone, and amenities and infrastructure like sewers, school, parking and subway places, greenery.

In London, massive arrival of Russian rich has also brought street shootings, plutonium murders, and suspicious “suicides.” Chinese and French are better behaved, but they still push up real estate values to make anyone with a normal income unable to afford living downtown in the city. New taxes to tap into the nouveau riche element often also hit people who are rich only in property and cannot pay them. Not what I want here.

I would like to arrange for a suicide for our board prexy Stash, but not at the expense of comity in the hallways.

As already reported, I have to move my brokerage account as e-trade has unaccountably opted to stop offering foreign share purchase and sales—or even tracking for non-US stocks unless they are ADRs. Amazingly, this seems to include Canada and Mexico.

Just to add to my woes, my bank, HSBC, being hit with massive fines for misbehavior in France, Switzerland, and both the US and Britain (it has been HQ'd in Britain since the Chinese took over Hong Kong) now threatens to move back to the Pearl River basin in the hope that the Mainland Chinese will accept some of its fuzzy misdeeds to get back a Big Name. That means I will probably now want to open a different bank account.

A comment on “the short of the century” according to Bill Gross, whose Grexit from Pimco was last year's big news in bond funds. He pounded the table in support of shorting German euro-denominated long bonds (20 or 30 year maturities.) Since these bonds have a negative yield under the euroland quantitative easing system, what that means is you pay the interest to the owner of the bonds you short. But since the interest is negative, payable by the borrower, not the lender, in fact you get paid to short the bond.

You will also make money if the negative interest on German eurobonds goes up. This is a through the looking glass turn on how bonds react to newer bonds coming out at lower interest rates than the ones already being held. If the new bonds have a lower yield (or a higher negative yield), this makes the price of older bonds go up.

Unlike Mr Gross, I am not a bond specialist. I can barely tell a tick from a TAC. But I can see that any theoretical pricing for a negative interest rate environment requires lots of high-risk assumptions. So maybe it is just as well that I am not in Mr. Gross's Pimco any longer. No, don't listen to Gross. He is probably profiting from the inflow into German bond shorts to exit his own positions.

Today is a holiday in Brtain, The Netherlands, and Japan, so news is light.

More for paid subscribers from Australia, Belgium, Israel, India, Finland, Brazil, Britain, and Ireland today. Mostly biotech and pharma news with which we begin:

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Workers of the World Unite

Fri, 2015/05/01 - 7:49am | Your editor

Today is May Day when half the world takes off from work for a long weekend to celebrate a 19th century US agitation for a 40-hour workweek. For political reasons, it is not celebrated in the US and we have Labor Day instead. While May Day heralds the coming of summer, Labor Day marks the start of unpleasant weather and political campaigning.

Britain also doesn't do May Day, not because the weather can be cold and cloudy, as it is today, but because by tradition it has a May Bank Holiday serving the same purpose. Since it takes place Monday, it also produces a 3-day weekend. This is not the same thing as a “bank holiday” in the USA which marks a period when troubled banks don't allow withdrawals. Still, even here some people are dancing around a maypole in heavy coats and scarves.

Monday off may create enough joy to get the coalition government re-elected Thursday, but probably won't. Apart from mad MK of Stockwell who will commemorate his working for Nelson Mandela by voting for the “black” local candidate of the anti-foreigner United Kingdom Independence Party, everyone else I know is voting exactly as they did the last time. Last night our friends in The People's Republic of Islington produced a whole lot of feeble excuses for voting Labour again, claiming that their local Labour council member running for Parliament had done great things for the area. Another fellow in PM Cameron's constituency will also vote his family tradition rather than his brain.

Just in time for its May Day festival, the French Socialist govt. successfully added enough temporary shares to its packet at Renault to block an opt-out under the Loi Florange. It gained double votes to tighten its control of the car-maker. Apart from management, the other victim of the coup is Nissan. Boardroom battles at European car-makers like Renualt and Volkswagen result from lower gasoline prices (which encourage people to continue driving gas-guzzlers.) I think the biggest news yesterday was not the US$ continuing to sink but the 5.6% rise in natural gas prices.


While on the road I got the following notification which I could not act one from abroad:

The credit card we have on file for your Wall Street Journal subscription needs updating. Delivery of the paper is scheduled to stop if we do not hear from you.
Do not reply to this email to update your account.
To avoid an interruption in service, please contact our customer service office at 1 800-JOURNAL (568-7625) to provide updated credit card information.


I got a contrary note today from Rupert Murdoch's paper today.

You may have recently received an email from The Wall Street Journal asking you to update your credit card information. This email was sent in error and we apologize for any confusion it may have caused. The email was the result of a technical issue that has since been resolved. If you have indeed received the aforementioned email, please ignore it. If you have any further questions, please email us at


From now on I will stop apologizing when our primitive renewal notification system at acts up.


One advantage of the UK 3-day weekend is that our return flight to JFK airport Sunday was at a bargain price as UK clients stayed put. I will do a blog Monday, perhaps late for jet lag. More for paid subscribers follows from Brazil, Canada, Thailand, India, France, Denmark, Israel, The Netherlands, and Ireland.

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Quarterly Reports Day

Thu, 2015/04/30 - 9:17am | Your editor

The trouble with stashing all your ill-got gains into a secret offshore account is that you may be found out. This happened to Jean-Marie Le Pen, founder of the French right-wing Front National party. He turned out to be less up-front or nationalistic than expected, with a Swiss bank account.

The trouble with stashing all your ill-got gains into a secret offshore account is that you may not be able to access your money if you need it. This happened to the accused British flash-crash trader Navidar Singh Sarao, so far unable to raise £5 mn in bail from his alleged secret accounts. His parents in Hounslow raised £50,000 of the total. Navindar is alleged to have made £26 mn from his spoof trading which caused the May 2010 market selloff. The proceedes were placed in an Employee Benefit Trust and then written off. The remainder was put in a company called Nav Sarao Futures Ltd in Anguilla, an offshore Caribbean island, with a fellow Sikh partner who manages a bank in Abu Dhabi. Unless he can pay up, Sarao, 36, may face British jail before he is extradited to the US where he faces multiple charges mounting to 380 years of prison.


European inflation in April rose from -0.1% in Q1 to zero. This means that its quantitative easing policy may encourage people to spend money rather than keeping it for another day when it will buy more. The eventual boost in spending will help the US economy and that of Third World countries (I hope, fingers crossed.) However in trading today, my Euroland favorites fell more sharply that Wall Street did yesterday after the Fed by silence extended the period for low interest rates beyond June. More on what this means and other macro news for paid subscribers below. And the dollar continues to drop.


Pope Francis keeps on getting things right. So far this week he has backed calls for a full accounting of the Argentina “disappearances” under the military junta. He also stated that the underpayment of women doing the same jobs as men was a “pure scandal” (despite the 30% discount for valuing females in the Bible.) And he has granted a Papal Knighthood to NY Rabbi Arthur Schneier, 85, for his work in supporting religious freedom. Austrian-born Rabbi-Knight Schneier, rabbi emeritus at Park East Synagaogue, came to the US as a child. While almost all Papal Knights are Catholics, Pope John XXIII also knighted a rabbi.

Given a sword by Cardinal Timothy Dolan at the ceremony to mark his becoming a Knight of St. Sylvester, particularly appropriate for someone born in Austria, Rabbi Schneier said he supported arms control. “What should I do? I'm in favor of gun control and sword control” he asked the NY Cardinal who replied “beat it into a plowshare.”

More for paid subscribers from Israel, The Netherlands, Finland, Britain, Ireland, France, India, China, Brazil, Denmark, Canada, Norway, and Mexico. Many companies reported on Q1 today.

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Update for Paid Subscribers

Wed, 2015/04/29 - 9:04am | Your editor


Here is an updated Weds. report for paid subscribers on a stock which reported right before the NY opening.

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Catch Up in London

Wed, 2015/04/29 - 7:27am | Your editor

The latest disarray in management after Volkswagen has hit Industrivärden, a Swedish holding company owned by a bank. The designated new CEO has been ousted. At VW the powerful board chairman, member of the founding family, had to resign lest he be fired after failing to dismiss the CEO. The days when getting to the top of a company using connections and ambitions have ended. It is now more of a race than a slam-dunk. What with shareholder dissidents demanding buybacks and dividends, for example at Fanuc in Japan and activists and short-sellers grabbing the headlines, corporate governance may not be good for your career.

Even if you do keep your job, for example at Barrick Gold, your shareholders may vote down your pay package if it is deemed excessive. In this case it was $12.9 mn in salary and bonuses to executive chairman John Thornton. The Canadian mining group had earnings of only $57 mn in Q1 and cashflow of only $316 mn, so shareholders felt they were being abused.

This is a brave new world.

Bad news from my supposed global discount internet brokerage: E-trade will end its global trading facility in mid-July. I will have to change brokers which is a pain. I have already moved some part of my bond portfolio to my bank, but it charges high fees. I am back to living on the street rather than living on Wall Street. I can do nothing until I get back to the US next week but it is scary all the same.

More for paid subscribers follows from The Netherlands, Germany, the UK, Spain, India, Canada, Israel, Australia, Belgium, The Netherlands, and Mexico. Including a fund update for readers seeking instant diversification and hedging. Back in London I am catching up.

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A Slovakian Investment Idea

Tue, 2015/04/28 - 3:59am | Your editor


Slovakia has the largest auto industry in the world on a per capita basis, thanks to Skoda, its historic brand, and the influx of global assembly plants targeting European Union from a central cheap-labor country. Its 5.5 million people produce a million cars a year, and the NY Times called Slovakia “the European Detroit”. The difference is that Slovakia is not bankrupt.

Now a mad Slovakian pair have come up with a new venture in automotives: a flying car. AeroMobile of Bratislava is raising funding to move from its functional prototype of an automobile which can fly. The flying care was the subject of a serious article by Henry Foy of the Financial Times last week. (Foy used to be automotive correspondent for the UK paper and now is its Central Europe correspondent.) He saw the prototype plane being flown from Nitra, about 60 miles east of Bratislava, but was not allowed to ride in it because of insurance rules. But, yes, it flies.

The wings slide out from the side of the auto chassis when a button is pushed. The 4 car wheels do the take-offs and landings. There in no pressurization inside the car cabin, so the plane can only go up about 3000 meters. The airplane engine was bought off the shelf, but almost all other parts (90%) were crafted or sourced in Slovakia.

By the way, the plane, has an autopilot system. And yes, there are built-in parachutes. It currently can fly about 200 kilometers or one hour but the plan is to boost that to 1000 km and get speeds up higher. The current company has 60 employees and they of course use 3D printing and craftsmanship. Interestingly enough, Slovakia already has 5 private aircraft manufacturers.

Behind this incredible venture are two Slovakians, Stefan Klein, a multi-generational aviator whose father flew in the RAF during World War II, 55; and Juraj Vaculik, 48, who financed the flying car startup and is company president. The airfield the firm uses is next to Mr Vaculik's castle. They have been friends since they were dissident students together in former Czechoslovakia.

So far, AeroMobile has resisted buyout offers. The pair want to scale up and invest in R&D while bringing in professional managers, starting with an ex-exec from McLaren (maker of the Formula One car). They are working with British and EU regulators to meet road and air rules with their flying car. But they want to be independent for longer. They want to boost the range and weight the prototype can handle and create a sellable flying car in the next decade, with a cost in the 100s of thousands of euros (now more or less the same in dollars.)

So my best Slovakian investment idea cannot now be acted upon.

A reader sent me a good quote about Austria, my subject in Sunday's blog, quoting a Viennese: "We won [the war] because we have managed to convince the world that Beethoven was an Austrian and Hitler was a German."

Venezuela seems to have sold its gold reserves to Citigroup and coupled with Greek politico-economic uncertainty, this goosed up the price of the yellow metal hugely on Euroland markets today. Gold is up over $1200/oz, the biggest jump in 3 months. Do not sell your gold in May. Don't sell your foreign stock in May either. If your broker suggests this, get a younger advisor!

More for paid subscribers follows including a quarterly report plus news from Norway, India, Spain, Austria, Colombia, and Panama.

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