Negative Return Bank Accounts
In reply to a new reader, here is why banks charging negative interest can still draw deposits. Right now two countries are both charging 0.75% in interest per year in return for deposits, Switzerland and Denmark. Both are actively trying to discourage inflows of funds from neighboring euro-group countries which would force a revaluation of their currencies, the Swiss franc and the kroner.
In addition, other countries like Germany and Singapore have forced down interest rates to 0.05%, pretty close to negative as well. So the question remains: why would anyone make deposits in order to pay the bank for taking their money, or settle for a barely visible rate of return?
Three actors are depositing. First there are speculators. If negative or negligible rates of return go lower still (because foreign exchange pressures continue), the depositor gains. Just as rising cash interest rates cut the face value of bonds, and falling cash interest rates increase them, in the world of negative yields, the same forces work. More negative interest rates in the future will produce a gain. Read more »
Sunday Portfolio Update
Another expected blizzard failed to hit NYC as I updated the performance tables this morning.
From Barrons' (whose Randolph Forsyth quoted from BCA Research from Canada), “financial conditions in the US are set to tighten, posing a head wind for U.S. shares. Investors should consider shorting US equities vs a basket of stocks from the euro area, Japan, and China.” And to offset exchange-rate effects, $-based investors “should use currency-hedged exchange-traded funds.” That's what we do already.
Everyone can view the closed-positions tables but only paid subscribers get our current list of holdings and advice. To view the spreadsheets more easily on the http://www.global-investing.com website, use the printer friendly button above the tables, even if you do not want to print. More for paid subscribers follows: Read more »
Plans Gang Agly
Our planned trip to hear our grandchildren perform music in Boston was cancelled by the bus company because of bad weather early this morning. So I am back in the saddle after all. I joked about going by dog-sled yesterday but we don't have a dog or a sled. Planes are not flying. Amtrak runs but late bookings are costly and trains crash. I am writing today and doing the tables over the weekend after all. The children play the violin (11 year old), piano (10), and cello (6) respectively. Our older grandchildren play the trumpet (14) and the cello (13).
This musical note is because on both sides of the Ukrainian divide, amidst war, destruction, and currency devaluation, concerts and opera performances continue. Musicians and singers are in the same boat as other Ukrainians or rebels. But music is performed also to show that rebels and Kiev supporters both are kulturny, cultured, Europeans. Music also sooths the troubled breast.
The Danish government raised the negative interest rate on krone accounts to 0.75% as it fights to keep the currency tracking the euro.
Remember to sign up for free stock trading with Robinhood. I have now learned its free trades only apply to listed and not OTC stocks. To sign up please visit https://www.robinhood.com/?ref=WmgJ6b. That address is to join me on the waiting list.
More for paid subscribers follows with a stock sale, a result (just one), and tidbits from Singapore, Britain, India, China, Brazil, Japan, Mexico, Norway, Switzerland, and Canada. And a trading alert.
Thursday's Child Has Far to Go
Readers who want to pay zero brokerage commissions are advised to join robinhood.com which is building up a list of people who will get free trading on US stock markets. I am not sure if this will include OTC stocks. To sign up please visit https://www.robinhood.com/?ref=WmgJ6b. That address is to join me on the waiting list.
Since my paid subscribers had a special report last night, and since I have 7 quarterly or annual reports to cover today, I am not writing up macro news today. I will also knock off early tomorrow to travel via sled or bus to Boston in the snow, so the blog will be shorter.
Over to the reporting companies, in alphabetical order from Britain, Canada, Israel, Japan, Norway, Singapore, and South Korea, and other news from Ireland:
Don't Outsource Your Brains
Don't outsource your brains. You will get hacked.
The internet is a sieve. Today I received “linkedin” e-mailings from a host of former subscribers, writers, and contacts asking me to befriend them using the social media site, on which I never registered. No, I did not click to their names to contact them. That way lies perdition. Instead, I wrote to them individually if I had their email addresses telling them to stop it. At least one friend wrote back that he has no idea how to un-link with linked in.
Then a contested bill which my husband says he paid resulted in a bunch of emails to me, which among other things disclosed details on his personal (non-joint) check account I should not have access to. The e-mails were sent to my corporate account.
In both cases I was able to establish, barely, that my identity and e-mail security had not been breached because I recognized that the e-mails were, however vaguely, linked to me. But there is a thin line between plain old bureaucratic laziness or marketing excess and scams.
Among our relatively small group of paid subscribers, there were four data-breach incidents from hack attacks in 2014. The readership of www.Global-Investing.com is up-market, bright, sophisticated, and global. Nonetheless these US readers inadvertently allowed access to their e-mail addressbooks to fraudsters soliciting money for an alleged health, housing, or travel emergency, blasting all their contacts, among others, me. People often open email attachments from people they vaguely know without considering the risks of a virus attack.
My personal bank and debit card accounts were hacked late last summer with nearly $900 of fake debit card transactions alleged at a Target store in Brooklyn I never visited. My debit card never left my wallet the whole time. The breach was at a different retailer, Home Depot, where I had shopped 5 months before.
The efforts required to redirect automatic payments to and from the new account required massive hours of work. I have only just completed converting the last of the autopays to the new account this month. So while the bank did not charge my account for the fake $900, it also did not automate the transfers to the newly opened account.
Being in the investment newsletter business, I naturally get cold calls from peddlers of financial schemes as well as e-mails which go into the spam list. I say thank you, don't call again, and hang up. They call repeatedly despite this trying to create a connection. (A business does not have the right to create a do-not-call blocks, but in fact the investment scammers operate from offshore centers to get around this even when they are calling US households.)
More for paid subscribers follows from Britain, Australia, Switzerland, Colombia, Singapore, India, China, and Brazil including another key quarterly and annual report from one of our companies.
I find the dispute over whether or not children should be vaccinated against measles terrifying. There are parents who still believe that vaccines are poisonous or unnatural, while others fear that jabs will give their children autism, based on 1996 charges from a British doctor, Andrew Wakefield who has now been discredited there.
To get his charges published by The Lancet, Dr. Wakefield made up a “deceptive” and “improper” epidemiological study of 12 children who were said to have developed bowel and mental problems after their vaccination. He invented a disease called autistic enterocolitis which he said resulted from use of a triple jab (MMR, a combo of measles, mumps, and rubella or German measles).
This finding led to Dr. Wakefield being struck from the General Medical Council in Britain for “serious professional misconduct” and as a result he could no longer practice medicine. Later research by other British medical journals concluded that the Wakefield Lancet article was “fraudulent.”
Since then in various countries, studies of the results of vaccination concluded that while there are risks, the benefits greatly outweigh them. And risks can be reduced by more careful design and reporting on MMR vaccination. But they found no linkage whatsoever between the jab and the child developing autism or colitis. (Crohn's disease wasanother supposed result of vaccination ex-Dr. Wakefield had cited.)
Lawsuits by the parents of autistic children in Britain and the US failed to show any causal link with MMR shots.
Despite this, after 1996, vaccination rates fell in Britain and Ireland because of what doctors call “the most damaging medical hoax of the last hundred years.” There were increased incidence of measles and mumps resulting in some permanent injuries and deaths. German measles which harms their unborn babies is particularly dangerous for pregnant women who have not been vaccinated earlier and resulted in abortions. (Queen Juliana of the Netherlands in 1947 refused to terminate a pregnancy when infected with rubella in the hope of having a son. She bore a mildly retarded partly-blind 4th daughter, Marijke Christina.)
Measles, which can lead to meningitis, brain damage, deafness, and death is the most potentially deadly of the childhood diseases.
Now an outbreak of measles centered on Disneyworld in California and now spreading in this country raises uncomfortable ethical issues about parenting and social responsibility. In many areas, local rules require that kindergarten and school children be vaccinated, to protect other children. The success of vaccination program depends on most children being innoculated to protect those who cannot be given MMR. Infants less than a year old do not get vaccinated (because they still have some immunity from their mothers which means it will not “take”.) Children and adults with immune deficiency should not be vaccinated. And a certain tiny number of vaccinations for childhood diseases fail to work also putting children at risk. MMR cannot be given to pregnant women because of the rubella risk.
Sen. Rand Paul MD called for “most vaccinations to be voluntary”, essentially opposing any local governments enforcing rules requiring that children attending schools or nurseries have had their shots.
He made a weird comment: “children do not belong to the government; they belong to their parents.” Actually in my opinion, children do not belong to their parents either, especially if some silly fear of “profound mental disorders” resulting from measles shots (another remark by Dr Paul harkening back to Wakefield). Nor do parents who have a total hatred for government at every level (as some of his followers do) have the right to endanger their own children or those of others over “an issue of freedom” (another remark of Dr. Paul's.) Like Bashar Assad, Rand Paul is an ophthomologist.
This unscientific approach to inoculations is ultimately dependent on a conspiracy theory, that governments are faking data on vaccinations—as they allegedly are also doing about climate change. And in teaching evolution in schools. The difference is that measles kills children now. Climate change takes longer. And being misinformed about the age of the earth may not hurt most children when they are grown up, even assuming that they never learn better.
More from Canada, Colombia, Spain, Ireland, Finland, Israel, Britain, Portugal, Mexico, Brazil and Hong Kong including two quarterly reports. With my internet access still wobbly I am not going to do a new stock pick today either.
The 11th century Chinese Prime Minister Lu Mencheng discovered that officials were smuggling. He told Ming Emperor Tai Tsung who ordered: "only the most serious offenders need be punished. As long as their work is not affected let them do a bit of smuggling on the side."
Lu agreed. "If the water is too clean there will be no fish. If a man is too perceptive he will not get people to work for him. We understand what these villains are doing, but it is better to tolerate them so they have a place and do not make trouble elsewhere."
paraphrased from Michael C. Tang's A Victor's Reflections: China's Timeless Wisdom for Leaders, (Prentice Hall 1999).
The dirty water rule only applies to state officials, not to private-sector smugglers or villains.
Back in 2013 our reporter got antsy about Minsheng Banking Corp (HK:1988) and we sold at a loss. We had scooped up Minsheng as a Hong Kong-listed private sector challenger to the state-owned Chinese dinosaurs operating all over China thinking it might aim to make money rather than channel funds to Beijing's favorites.
But she worried Minsheng would be disadvantaged by not getting access to cheap money granted to state-owned rivals. State sector banks got continued fund access and spread the money around to corrupt or bankrupt politically-connected companies without penalty.
But Minsheng did not. It now has been targeted for alleged corruption.
Minsheng CEO Mao Xiaofeng last week resigned “for personal reasons” after it was reported that authorities had taken him into custody “to assist with an investigation”. The Minsheng board said in a statement to the Shanghai Stock Exchange over the weekend that it had accepted Mao’s resignation and appointed Chairman Hong Qi as acting president.
Nick Raich in www.EarningsScout.com today writes:
“Higher energy prices in years past have choked off economic growth. Ironically, low energy prices are now having the same effect.
“Remember, the porridge cannot be too hot or too cold. With the destruction in energy earnings expectations as oil price plunged, capital spending plans and jobs are at risk. The benefit of lower prices, a huge positive, may not be enough to offset the damage.
“Overall earnings expectations are falling because of lower oil price. S&P500 earnings expecations are falling at a rate we have not measured since the financial crisis of 2008.”
Because of intermittant Internet outages I am holding off on new stock ideas for today. The FTSE, the British index, had the best monthly gain in 11 months in Jan. but only for sterling investors. Gold also did well for those not based in greenbacks but for dollar holders rose 8% after 5 months of redemptions by gold ETFs.
Today we have important news from Ireland, Israel, Turkey, Egypt, Spain, Britain, Norway, Australia, Denmark, Finland, Switzerland, Brazil, Canada, Colombia, Portugal, and France.
It is marginally warmer and we are considering walking a few blocks further than our local Chinese place to try a newly opened Vietnamese restaurant. My husband hasn't decided yet. Meanwhile, your editor has posted the new figures for our trio of portfolios. Everyone may view the closed positions table, which now actually has some data for 2015. But only paid subcribers are allowed to see our current holdings in the Stocks and Bonds table and the Closed-End and Exchange Traded funds table. Use the printer friendly button to make the spreadsheets more readable, even if you don't want to print. Read more »
Our Canada Issue
British economic consultant and old China hand Rodney Jones is quoted in today's Financial Times. Based on his inside knowledge and the country's steadily falling import data, he concluded that Chinese growth in 2014 did not hit the officially reported 7.6% rate. He says it was only 5.6%. Mr. Jones used to be George Soros's man in China and now runs a repected business advisory.
Today newsletter tracker Mark Hulbert notes that the Dow Transports index, supposed gainer from the lower oil price, has not risen as expected. This is worrying for two reasons. First the transport index is a traditional harbinger of recessions (because shipping is a sign of economic health.) Secondly, under the Dow theory, a rise in the Dow-Jones Industrials has to be confirmed by a rise in the Transports to continue. Mark now writes for Dow Jones but we know him as the newsletter performance tracker, like ours, in his Hulbert's Financial Digest.
While many countries are trying to depreciate their currencies, most recently Singapore, two countries are trying to boost their exchange rate, perhaps futilely: Russia, which has thrown its sovereign wealth fund into the effort; and Brazil.
Today's blog contains a new UK stock pick for the long-term from Martin Ferera, lots of news from Canada, and Britain.