Fund Flows

Wed, 2016/10/19 - 2:29pm | Your editor

The third quarter saw escapism by investors from the brutalities of Brexit and the comedy of the US campaign for president. So naturally they went in for a different kind of investment, returning to the stocks from emerging markets. Helping the trend was the US Fed's caution on hiking interest rates, which could hurt debtor companies from the Third World.

In the September quarter, “emerging markets equity funds posted their biggest quarterly inflow” since the same quarter in 2014, while “emerging markets bond funds [had] their biggest [inflow] ever”, wrote Cameron Brandt of EPFR Global, a firm which tracks flows into funds. He writes also that US investors were net buyers of both stock and bond funds from developing countries. The only exceptions were Canada and Australia which are counted as beneficiaries from higher oil prices.

Japan equity funds had a tought quarter with foreigners taking out $5.4 bn from Japan funds. Meanwhile Japanese domestic investors were placing their money in a tiny handful of index-tracking funds to mimic the way the Bank of Japan was operating its stimulus program by buying the Nikkei.

Meanwhile developed country markets saw net outflows via redemptions from funds, with Western Europe hit hardest with outflows of $45.23 bn and the USA losing $23.32 bn. Global emerging markets equities had inflows of $22.86 bn.

By sector, there were inflows into commodity funds, notably ones holding gold and precious metals, and into tech and real estate. Spooked by scandals, investors took more than $5 bn out of healthcare funds, and much smaller amounts out of financials, utilities, and even infrastructure.


Beside mastering Bible lore my eldest granddaughter Ella is also fast, one of two Cleveland Heights girls who took home the Lake Erie League Championship title coming in second in the 5 km course at 21:17. The girls won 5 of the top 11 places. Mazel Tov Ella.

More for paid subscribers follows from Switzerland, Sweden, Colombia, Brazil, Spain, Argentina, Brazil, Israel, Hong Kong, Canada, Britain, and Spain.

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Double Issue

Tue, 2016/10/18 - 2:33pm | Your editor

Today and next Tuesday are double issues because of the Jewish holiday.

When she was a little girl, my eldest granddaughter Ella taught me that the Biblical city of Nineveh is now called Mosul. During the Jewish High Holy Day of Yom Kippur we read the story of Jonah, who was instructed by God to go the “Nineveh, that great city” and warn the people there to repent lest their city be destroyed. Jonah as is well known opted to go in the other direction, sailing from Jaffa into the Mediterranean. There he wound up swallowed by a great fish or a whale before he wis spat out. He reluctantly decides to do what he was told.

The message of the Bible story is not merely that if God tells you to do something, do it. It is also that we are responsible for one another on this earth. The people of Nineveh would have been pagans in this pre-Islamic period.

After he went to Nineveh and successfully preached repentance to its inhabitants, Jonah continues to challenge God, objecting to His having spared the Big City sinners. He sits under a bush complaining. Then it dies and he suffers from sunburn and heat and laments that the bush has died.

God then tells him that he is mourning for a bush that he had no role in planting whereas he was ready to write off Nineveh with its huge population including many too young to know their right hands from their left. We are all responsible for liberating Mosul, which was thrown to the ISIS dogs by mistaken policies by our two most recent presidents.

Inflation annualized is up 2.2% in the USA and 1.5% in Britain. Inflation is baaack and interest rates will rise to match it, according to Marc Chandler of Brown Brothers Harriman (writing in today's

Meanwhile the Eurozone is suffering from Japan-style deflation and low growth which John Llewellyn attributes to mistakes made earlier: interest rate rises in 2008 and 2011, and delay in moving toward quantitative easing compared the the US and the UK. He also cites “overkill” fiscal consolidation imposed on Greece and Portugal while leaving Germany's continuing budget surpluses un-addressed. John heads in London and is formerly deputy chief economist of the OECD.


More today from Britain, Mexico, Israel, Denmark, Belgium, Switzerland, Australia, Japan, China, Hong Kong, South Korea, South Africa, Canada, Colombia, and the Dutch Antilles.

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Sunday Tables Posted

Sun, 2016/10/16 - 12:10pm | Your editor

I posted the tables on our website today, where readers may view them. Note that we have had a lot of difficulty sending out the daily blog from our website late last week, and the webmaster is still working on getting the site up. Meanwhile, when you are visiting the site you can also view the blogs from Thursday and Friday. They have been combined in an effort to overcome the blockage--which did no good. More for paid subscribers follows: Read more »

Market and Elections

Fri, 2016/10/14 - 1:25pm | Your editor

Yesterday Britain faced a Marmite crisis. If you are not married to a Briton like I am you may be unaware of the national taste for this muddy yeasty sandwich spread. It apparently is imported by the maker, Unilever, which has attempted to raise its wholesale price to UK Tesco supermarkets by 10%. Tesco refused and also removed other UL products from its shelves. Both shares are down because of the row.

The UK supply of Marmite will resume without a 10% price increase. Tesco and Unilever have worked out a compromise—details unknown—to restore UL products to TSCDY's supermarket shelves after banning them to block a 10% rise in the price of the smelly brown spread beloved of Britons. It goes to show that all the effects of Brexit will not be bad. I had hoped a ban on the stuff might persuade my husband to give up his addiction to Marmite, but no such luck.

Note that during the row UL also stopped deliveries to Tesco of other produces like Hellman's Mayonnaise, Persil detergent, and Flora margarine. So I suspect Tesco is paying more than 5% more. Its stock rose 4.41% at the London close.


Here is more information about how Interactive Brokers keeps its commission levels low. First of all their regular website charges customers for foreign stock prices. To trade on the site without being disadvantaged by the “counter-party” you have to subscribe to get market data by the month—and it is not cheap. Moreover the normal counterparty to your trades is not an outside market-maker, but IB itself which runs its own Dark Pool. It uses a SmartRouting system that supposedly searches all available exchanges to find the best price available at the time you place your order. But given that foreign markets do not observe Wall Street hours, there may not be any quotations for some obscure or thinly traded foreign stocks, putting you are the mercy of the IB Dark Pool. You can insist on routing your order directly to an exchange, but there may be a gap in price discovery if it is closed when you are placing your order—which may not go through.


More follows for paid subscribers from India, South Africa, Thailand, Brazil, Argentina, Australia, Ireland, Britain, Israel and a few other places. There will be no blog Monday. After today's newsletter I am also pasting Thursday's because many readers did not get it for some mysterious reason. By combining them I avoid the overload causing the letters to be viewed as spam.

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Yom Kippur A Day Early

Tue, 2016/10/11 - 1:39pm | Your editor

The fast day began a day early as Wall Street collapsed in the wake of rotten earnings from bellwether Alcoa--and general uneasiness about politics and finance.


European banking regulators made special exceptions to the rules of their stress test to ensure that Deutsche Bank looked more solvent than it is, report today's Financial Times. The British newspaper writes that the tier 1 equity of Germany's troubled major bank was boosted by counting $4 bn “proceeds” from DB selling Hua Xia as part of its capitalization by the European Central Bank stress tests.

This preferential treatment came because the China sale was not completed and the $4 bn not paid over by the stress test deadline of Dec. 31, 2015. In fact, the sale of Hua Xia is still pending and the German bank still has not received the money. So its common stock equity stress test capital ratio was not an alarming 7.4%, but a slightly less alarming 7.8%. However lesser banks from other countries like Spain were subject to stricter stress-test rules which meant that their pending deals did not improve their capitalization ratios. DB would immediately fail any future US stress tests under existing rules, because the US relies on foreign regulators to do homeland stress testing for banks operating here.

The ECB insisted that it “treats all bank equally in line with the regulation”--which reminds me of Donald Trump saying he respects all women.


Today the ECB, the Fed, and the Bank of England are working on a new way to cooperate over a major bank failure to preserve financial stability. Before they work on their reactions they may just want to improve the quality of the information they are getting from each other.


Meanwhile a Swiss banking arm has been shut down in Singapore as part of the investigation into the diversion of money from the Malaysian sovereign wealth fund to individuals in the government. The Singapore Monetary Authority (which counts as the island state's central bank) shut down the Falcon Private Bank in Singapore while imposing a fine on its Swiss parent. The managing director of Falcon in Singapore was jailed. This was reported by today's Neue Zuercher Zeitung.


Wells Fargo is not alone. Nor are problems confined to the banking sector:


My son the chartered financial analyst is raising cash levels in managed client accounts because of “nervousness about valuations, interest rates globally, corporate financial engineering, and dearth of real revenue or profit growth.” To say nothing of attacks, so far mostly verbal, on the US military from The Philippines, Russia, and Afghanistan, and at the USS Mason in international Red Sea waters with missiles fired by rebel Houthis from Yemen.


More for paid subscribers follows from Britain, South Africa, South Korea, Spain, Canada, Denmark, Mexico, Brazil, and—a first—Croatia. No blog tomorrow as it is the real Yom Kippur!

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Portfolios Updated

Mon, 2016/10/10 - 4:08pm | Your editor

Because of problems with our website Drupal software, I could not completely update our portfolios on Sunday, but have just succeeded in doing so on Monday. Visit to view the portfolios you are eligible to see: closed positions for all; and our current holdings of stocks, bonds, exchange-traded and closed end funds for paid subscribers. To more easily view spreadsheets use the printer-friendly button.

Do consider becoming a paid subscriber--for the sake of your heirs or your own eventual gray hairs! Global Investing pays off. You will cover your subscription fee with stock gains.

Columbus Day Banking Developments

Mon, 2016/10/10 - 2:19pm | Your editor

Happy Columbus Day! If you want to sail the ocean blue, like Chris, you need money, and there are people out there ready to help you convert your currency--at a high cost!


The money-changers are cashing in—at airports and malls—as sterling collapsed. The official wholesale exchange rate for buying euros with pounds is euros 1.11/£. But foreign exchange booths at airports and train stations are offering at little as 89 euro cents per pound, according the the BBC (at Cardiff Airport). Read more »

L'assassin du dimanche

Sun, 2016/10/09 - 1:05pm | Your editor

Sunday is proving vulnerable right before a day without Treasury bonds or mail in the US; no trading in Canada, their Thanksgiving; nor in Taiwan where it is Double 10 day. All that tomorrow. Then Tuesday every Jew knocks off early for Kol Nidre, the start of Yom Kippur, which like all Jewish holidays and normal days begins at sundown the day before. Wednesday is the Day of Atonement, serious stuff.

This came after the Jewish New Year, which fell on October 3, and the Muslim one, which fell on October 2. Both use a lunar calendar, but normally the Muslin year is shorter than the Jewish one, and their New Years do not normally overlap.

October 10-12 or 11-12 are also closed for Muharram-ul-Haraam celebrated in the Muslim world and in Singapore, a day of repentence based on Yom Kippur instituted by the Prophet Mohammed (who copied the Jews). October 11 is also the Shia day of Ashura, the 10th of Muharram, when all Muslims are supposed to fast (a day before the Jews do). Read more »

Sterling Crashes

Fri, 2016/10/07 - 3:08pm | Your editor

First of all, apologies to subscribers using Yahoo mail or Cox as their ISP. Our emails to all these addresses were blocked. So too were email messages I hand sent to the subscribers from my own email-box. I have no idea what is going on, but it is related to Yahoo having been hacked—not by me! I cannot call most of the affected readers who are outside the USA. But I will attempt further direct notes to them from my private email account as the corporate one also is blocked.


A bit of comfort for having lost the national Colombian referendum over the peace deal worked out after 52 years of guerrilla war by the FARC: President Juan Manuel Santos was awarded the Nobel peace prize for his work on the historic deal. The Nobel committee said the award was given as a “tribute to the Colombian people”. He did not have to share the money with his predecessor, Pres. Alvaro Tribe, who led the “non” movement, nor with his partner in the peace efforts, the leader of the FARC rebels, Rodrigo Londoño, who goes by the alias Timochenko. Londoño on Friday said that he remained committed to peace.

Like other guerrilla commanders, he is wanted in the USA on drug-trafficking charges, and he leads a rebel army that the United States and Colombian governments consider a “terrorist” organization. So it was never likely that he would get to share the prize, which is voted on by 5 Norwegians experts.

The Sunday referendum was a bust for Santos but he may get a chance to renegotiate the peace terms. Barely 18% of eligible voters voted “si” on it Sunday while 18.3% voted “non”. The rest of the country’s voters stayed home.


In Asian markets overnight there was a flash crash which pulled sterling down 6% in one fell swoop to an unbelievable cable rate against the US$ of $1.1841 before briefly dropping to $1.1378—a trade which was canceled. But while sterling recovered and at the time the US markets opened it was only at $1.2363, still over 2% down from Thursday's level. This takes all our UK stocks into the Bargain Basement.

There may have been a trader suffering from “a fat finger” in Hong Kong or Singapore. The Bank of England is investigating with help from foreign market overseers. It was not George Soros this time, I think.


There will be a blog on Monday, despite Columbus Day, and another on Tuesday, despite it being the eve of the Yom Kippur holiday. However there will be no blog next Wednesday, the Jewish Day of Atonement. Today's blog was delayed by my trying to get help with the issue at Yahoo. There is no customer service at Yahoo.


More for paid subscribers follows from Israel, Ireland, Brazil, Australia, Britain, India, Hong Kong, Bernuda, Ethiopia, Switzerland, Germany, Denmark, and Canada.

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Exiting Brexit Part II

Thu, 2016/10/06 - 1:12pm | Your editor

My quotation of a commentary in the Toronto Globe & Mail about how British PM Theresa May can reset the Brexit vote by how she plays article 50 drew heavy correspondence and criticism. I just reprinted what Canadian pundit, David A. Welch of Balsillie School for International Affairs, wrote. He says she could call a snap election to allow repentant supporters of the UK leaving the European Union to reconsider their positions based on new information.

It will not be as easy as Prof. Welch seems to think. My son, who went to a British boarding school and then majored in political science as a US undergraduate, wrote that he agrees with Welch that naming Boris Johnson as foreign secretary was “a brilliant move”. But he points out that in 2011 the UK switched to a fixed-term parliament. So the next election has to be in 2020.

To go to the country earlier requires a “no-confidence” vote which means a significant number of Tories—who have a majority-- would have to align with Labour to vote against May's government. This would make it unlikely she could remain as Premier. Another scenario would be a bank-bench Tory rebellion against May if she is seen as 'untrue' to Brexit. It starts getting murky very quickly.

Another commentary came from Martin Ferera who called the commentary “wishful thinking”. A former British subject, Martin says if PM May really wants to keep things as they are, she would not say article 50 (of the European rules) would be exercised by the end of March 2017. The problem with waiting longer is that given the need for 2 years of negotiation on exit terms, Britain would then hit the run-up to the 2020 general election still inside the EU with no margin for extra time. So using article 50 in March means there will not be a soft exit or no exit.

Another comment from a reader quotes Byron Wien writing in Barron's who managed to ask Ms May a question during her mid-September New York visit to the UN: would the Europeans treat Britain like (in Henry Kissinger's phrase) “an escaped prisoner” and punish it for voting to leave? Or would they negotiate bilateral trade deals “with a positive attitude?” PM May responded:

Europe views me as a victim. I supported the 'Remain' vote. The populists took over the mind of the electorate and defeated us. Many European leaders feel they are victims of populism also and sympathize with me. I think European leaders will have a constructive attitude toward trade negotiations with the UK.” That seems to imply she is not planning to go to the country prematurely.


More for paid subscribers from Israel, Belgium, Brazil, Britain, Ireland, Colombia, Mexico, Canada, India, South Korea Panama, the Cayman Islands, and Switzerland.

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