Happyish 4th

Tue, 2017/07/04 - 6:29am | Your editor

This 4th of July we are celebrating another victory over Britain, because Post Holdings has acquired the favorite breakfast food of the British, Weetabix for $1.7 bn. The sellers were Bright Food of China and Baring Private Equity Asia. (I thought the House of Baring was bankrupt but apparently it is still functioning.)

But the Hessians are not as well contained, as both Lidl and Aldi, two German cheap superette companies, plan a comeback assault on the USA st starting with an Independence Day themed Lidl opening in the US heartland, not far from Valley Forge. Lidl is pronounced "little".

The worst news on this Glorious 4th is that North Korea, the nutter state, can now fling its Intercontinental Ballistic Missiles westward and hit the USA or at least Alaska.

Another glitch took over pricing of Nasdaq tech stocks after the early Monday close, and some winners like Alphabet and E-Bay were offset by big losers like Amazon and Microsoft. We need better tech for stock trading.

Because I am flying home on Thursday, you are getting a special edition blog today from London. We have news from Japan, South Korea, Israel, Ireland, India, Mexico, Singapore, Finland, Spain, Colombia, and Denmark.

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Happyish 4th

Tue, 2017/07/04 - 6:29am | Your editor

This 4th of July we are celebrating another victory over Britain, because Post Holdings has acquired the favorite breakfast food of the British, Weetabix for $1.7 bn. The sellers were Bright Food of China and Baring Private Equity Asia. (I thought the House of Baring was bankrupt but apparently it is still functioning.)

But the Hessians are not as well contained, as both Lidl and Aldi, two German cheap superette companies, plan a comeback assault on the USA st starting with an Independence Day themed Lidl opening in the US heartland, not far from Valley Forge. Lidl is pronounced "little".

The worst news on this Glorious 4th is that North Korea, the nutter state, can now fling its Intercontinental Ballistic Missiles westward and hit the USA or at least Alaska.

Another glitch took over pricing of Nasdaq tech stocks after the early Monday close, and some winners like Alphabet and E-Bay were offset by big losers like Amazon and Microsoft. We need better tech for stock trading.

Because I am flying home on Thursday, you are getting a special edition blog today from London. We have news from Japan, South Korea, Israel, Ireland, India, Mexico, Singapore, Finland, Spain, Colombia, and Denmark.

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Road Less Travelled

Mon, 2017/07/03 - 5:35am | Your editor

We walk the road less-travelled.

British fund management overseers are under attack for allowing the asset managers they regulate to overcharge by claiming to offer expert stock-picking, and in fact then to only passively copy an index. Moreover they charge high fees to small investors for their “closet tracking”, about triple what large institutions pay for the same portfolios. Fees are so high that the operating margins of fund managers listed in London is 36% compared to only 14% in sectors like technology or pharmaceuticals.

Of course they don't tell retail investors about the high hidden charges they are imposing or the kickbacks they get from index funds of other investment vehicles or the commissions paid to fund salesmen (called financial advisors) or the

The solution adopted by US investors is to put their money directly into an index fund to avoid expensive management fees. But stock market tracker funds really don't work better, particularly when they aim an a small and/or exotic section of the market. As money flows in and out they have to buy and sell often at the worst possible moment: they buy on exuberance and sell at despair, and of course also incur trading charges. So they cannot ever properly track whatever they “hot” idea they claim to cover: marijuana stocks; self-driving vehicles; artificial intelligence; 3D printing; checkpoint inhibitors—whatever the best-seller is today.

More for paid subscribers today about how we pick stocks here at www.global-investing.com. We run a team of writers who cover major markets and look for good stock ideas. They are independent, paid by us, not beholden to brokers or investor relations share boosters or fund trying to improve their performance by “sharing” their hot idea. We research what we write about and achieve success which most of the time (except under irrational exuberance) beats those indexes. We practice active journalism—and leave it to our readers to invest alongside us.

 

More today from Britain where the worst abuses of retail investors occur, starting with the comments of a leading fund manager whose shares we own, and then highlighting some of our picks which index funds ignore. Despite July 4 there will be a blog tomorrow but there will be a hiatus later this week when I fly home to New York

Sterling today is settling over $1.30 and this means British shares we own are gaining for US investors by more than the 16 points the FTSE 100 index has risen by. I think the dollar's fall is related to shenanigans by President Trump but I am prejudiced against him and in favor of the press, of which I am a member.


 

More for paid subscribers also from India, Switzerland, Denmark, Sweden, Germany. Colombia, Israel, and France, but mostly about Britain where I am right now.

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Bremain Again

Fri, 2017/06/30 - 7:02am | Your editor

The Queen's Speech is supposed to sedately set out the work of the forthcoming Parliament and voting is supposed to be a mere formality. But with the current Conservative majority hanging by a thread, and the Labour Party trying to figure out a coalition to take power itself, yesterday's vote was nothing like the stately ritual. PM Theresa May hustled back from Germany to cast her vote and gather her troops. She managed to get the Tories to vote against the lifting of a pay cap for government employees proposed by Labour—by enforcing party-line voting, although many of her own MP's supported easing the Tory austerity policies.

To allow Northern Irish women to benefit from the UK liberalization of abortion laws—which her Democratic Unionist allies oppose—May got the Tories to offer these women abortions without any charge in the rest of Britain. Until now British courts required that NI women pay for abortions which are banned in their own region..

The Opposition splintered even more seriously, because they are further from ruling. Three Labour frontbenchers (potential cabinet members) were removed for defying Jeremy Corbyn by calling for the UK to stay in the single market after Brexit. A Labour Party leader opposed to Corbyn, Chuka Umunna, offered an amendment to the Queen's speech opposing Brexit.Another frontbencher, Daniel Zeichner quit as shadow transport minister to vote for Bremain and stated that he was resigning "with great regret" but added: "My position on Europe has always been clear. I am a passionate pro-European and a straight-forward politician."

Corbyn said staying in the single market is not Labour policy and ordered his MPs to abstain. But about 50 Labour MP's rebelled against this order..

Of course there are other Bremain supporters in Parliament as well, the entire block of Liberal-Democrats, and perhaps another 100 Conservative members. As John Llewellyn wrote here yesterday, the odds are rising for a vote on whether to proceed with Brexit after all, in the form of another referendum or simply splits over the matter in the two largest parties.

 

As the quarter closes, stocks are down in China, Hong Kong, and Japan but up in India and Europe. The UK market suffered its worst loss since Jan. 2016 in June.

 

More for paid subscribers follows from Finland, Sweden, Brazil, China, Colombia, Bermuda, Japan, Hong Kong, Australia, Israel, Switzerland, Canada, Panama, Angola, Germany, and, yes, Britain.

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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 www.Global-Investing.com.

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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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