Allah Loves Saudi

Wed, 2016/04/20 - 3:11pm | Vivian Lewis

Volkwagen was not alone in “fixing” its cars to pass emissions standards. Mitsubishi did the same for its own cars and those branded as Nissan, affecting about 625,000 vehicles. Donald Trump may well comeup with a new platform: resuming the fight against the World War II Axis countries. I am now very glad we exited Fiat Chrysler, which would have been another enemy alongside Germany and Japan.


Allah has looked after the Saudis royals despite the settlement of the Kuwaiti oilworkers' strike, which will bring back its output onto the global market. Saudi Arabia is preparing to borrow $10 billion in global markets to fund its refusal to cut output. It also hopes to raise money from a partial privatization of its national oil company, Saudi Aramco. Read more »

Lake Naivasha Bonus Stock

Tue, 2016/04/19 - 10:27am | Vivian Lewis

Thanks to the examination of African economies in the current issue of The Economist, I can appreciate how one of the few industrial scale businesses in Kenya flourishes around Lake Naivasha. It is growing flowers for export, boosted by lake water and thermo-electric power from the Rift Valley. This business depends on a very odd US export--the thermo machinery. The company is American but founded by Israelis. Read more »

We're Back!

Mon, 2016/04/18 - 11:59am | Your editor

The spam-blockers seem to have been removed, I hope, and no, I did not pay for this. So we hope that this newsletter will go our normally after a disrupted week.

Anyone expecting the Iranian and Saudi oil ministers to announce publicly how they will share the pain of cutting OPEC oil output, was disillusioned after the Doha talks (in Qatar) ended without an accord. That actually doesn't necessarily mean there won't be one later. The Middle East is the home rug dealers who have perfected the art of high-stakes daredevil negotiations. You always have to walk away before buying. Saudi oil minister Ali Al-Naimi insisted that Iran would have to cap its oil output. This despite Iran's returning to the world market is the major reason why the world is awash in unwanted petroleum in the first place. And it was to bring Iran back into the system that Opec was holding talks, and that the US and Europe supported its boosting oil output.

AS Iran wasn't even invited to the Opec meeting it could hardly sign up to cut output as Al-Naimi (or his deputy crown prince Mohammed bin Salman) demanded.


But for now the world is shocked, shocked, shocked to learn that oil prices are going to continue to fall. Actually there are some counterforces at work. First of all Venezuela, a key producer, is so broke that it has declared a 4-day week which will surely cut its oil output. Then of all things a strike in Kuwait has cut oil output by 60% from normal.


As a result, today “dollar-cousin” commodity currencies from Australia and Canada are lower. And currency havens like the yen are up confounding hopes for exports and recovery. The Nikkei dropped 3.44% today as stocks adjusted to the boosted yen. Both China and Hong Kong fell over 1%.

The price of crude oil fell nearly $1.50/barrel over more grief from glut and lower sales. Gold, everyone's sudden favorite investment, jumped to $1242/ounce.


Being of Ashkenazi ancestry and Reform, I am delighted that the Passover ban on kitniyot imposed by the rabbis in the 13th century, has been lifted by the more traditional (but not most traditional) branch of Judaism. Kitniyot are rice, beans, peanuts, pulses, peas, stringbeans—and by extension corn, which had not yet made it to the land of Ashkenaz before Columbus sailed. Kitniyot are suspected of containing leaven, prohibited on Passover. The ban did not apply to Sephardic Jews who had different rabbis in the 13th century. Somebody must have checked if rice or beans or corn “rise” like bread grains—as they don't.

The most traditional Jewish branch is Orthodox, most of whose US and Israeli members are Ashkenazim (from northern rather than southern Europe). They still observe the ban. Another no-no not lifted is eating roast lamb, what the Hebrew children ate as they left Egypt, because the Temple in Jerusalem was destroyed.

More for paid subscribers follows from Australia, Israel, India, Denmark, Britain, France, Mexico, Sweden, Colombia, the Cayman Islands, Brazil, Argentina, Pakistan, Japan, India, Hong Kong, and South Korea. Because of the disruption we are sharing our top few notes with pre-subscribers to give them a taste of what they are missing.



*Australian Orocobre reported that inQ1 its lithium carbonate production hit 2,332 metric tonnes, 97% of target, nearly double the level of the prior quarter. The site at Olaroz in Argentina is now cash-cost breakeven after debottlenecking was completed. Deliveries of “battery grade” high purity lithium to customers has begun and is picking up in the current quarter. ORL-Toronto (the easiest way to track this Oz company operating in Argentina) expects to produce 3000 tonnes this quarter at over US$7500/t this quarter, net of agency fees, international freight, and insurance costs.

Study of Olaroz stage 2 expansion will begin in this quarter to possibly boost production to 17,500 t/yr by investing ~US$140 mn with the Bateman Advanced Technology report due this month. Argentina removed the export duty on lithium carbonate after the defeat of the neo-Peronist Kirschners.

Even boring borax has become operationally cash-flow positive this quarter on still low sales, again because of the end of Argentine export duty on borax and mineral concentrates. Again the Australians are considering expansion of the project which has gained also because of a cheaper Argentine peso.

The Australian company is partner with Toyota Tsusho Corp, a sub of the Japanese carmaker, in Argentina, as well as with the local Jujuy govt. It owns 66.5% of the facilities. Its share also trades at ORE in Sydney.


*Eduardo Garcia writes that Mexichem has won US determination that China is dumping hydofluorocarbon refrigerant gas. This will result in compensatory anti-dumping tariffs covering refrigerant gas R-134A or 1,1,1,2-tetrafluoethane, according to a company communication. MXCHF's fluor division sells refrigerant gases which account for about 4% of total sales and about 3% of cash flow. US rival companies will also gain from the ruling which applies to them too. (Eduardo edits with which we trade articles.)


*The advancing impeachment of Dilma Rousseff was undermined by a report by Citibank forecasting soft pricing in iron ore. So Vale is down 3.21% today.


*France's Veolia was contracted to build a SEK 400 mn (~$40 mn) advanced “sustainable” waste water treatment plant in Boras, Sweden. VEOEY.


Energy Stocks

*The bid loser from the drop in oil prices is Colombia's Ecopetrol, EC, down sharply today.


*A boost for Veresen is likely now that a rival Oregon gas liquefaction plant (at the mouth of the Columbia river) has been scrapped because it could not raise funding. VSN's OR project at Jordan Cove was denied a green light last month by the US Federal Energy Regulation Commission on the grounds that it had not proven a market need. Since then half the eventual LNG output has been tentatively contracted for by Japanese companies. VSN is appealing the permitting process and the dropped the dropped Oregon LNG project is likely to boost its ability to finance its rival one.

Read more »

Tables Posted

Sun, 2016/04/17 - 5:08pm | Your editor

Despite the mess our webhost has made of our site, the portfolio tables have been updated as usual. Your editor is in the process of ACATing away from the user-unfriendly but cheap Interactive Brokerage site, so the job of finding prices was particularly fraught. I used Dow-Jones, and happily we are doing quite well with the global approach as the US dollar loses altitude.

Next week there will be no tables on Sunday which is the second day of Passover. We are spending the holiday here for a change rather than travelling to one of our childrens' homes. Read more »

Website problems not yet resolved

Sat, 2016/04/16 - 11:22am | Your editor

Because we were working flat-out trying to resolve the website technical issues today before the webmaster goes on vacation, there will be no full blog. Moreover my link to my brokerage is down because I have applied to move my account away from Interactive Brokers. It is now Saturday afternoon and I am still working on the problem along with our hosting site finally reached by telephone. So here is a brief opinion piece:


I've given up trying to guess the direction of oil prices, the current hot subject for intellectual speculation on Wall Street, something like determining how many angels can dance on the head of a pin. Will the Opec gang succeed in working out a way to let Iran back into the market Doha tomorrow? Or not?

Are Indian growth forecasts reliable or will the monsoon fail a third year in a row? I have no idea.

As for China's rate of growth, who knows? I hope some economist in Beijing under Xi Jinping has reliable numbers. We don't.

Is Bernie Sanders a threat to US prosperity like Donald Trump? Or not? One of my contributors and an economist I respect are donating to Bernie's grass roots campaign. I am not, but then again I used to work for a liberal Republican in Washington. What do we want to do about the US banking system and its risks?

I want to leave it to the Federal Reserve. The real issue confronting the world is whether the Fed will continue to worry about the global impact of its tightening—or not. Rate risk, bank regulation, and ultimately how high the Dow goes depend on that. And it is really tough to figure out.


Like the oil cartel, the banksters, China, and India, the Fed cartel and investment advisers are in disarray over what to do next. In fact the regional governors in the US, India, and China seem to disagree on what should be the course of monetary and fiscal policy. The difference is that Fed governors talk to the press and Indian gurus try to keep mum while Chinese pundits have to toe the line. But we can rely on none of them.


“It tough making predictions, particularly about the future”, to quote the late Yogi Berra. It's even worse if you are not sure what the facts are now.

Read more »

Puerto Rico, Our Greece, resend

Fri, 2016/04/15 - 9:30am | Your editor

It is much better to lend to an unrelated political entity than to one in which your country has an interest. After the shambolic refinancing of Greece by the European Union and the still incomplete attempts to salvage broke banks in Cyprus, Portugal, and Austria, the same lesson can be drawn over the plight of Puerto Rico and its creditors, most of whom are US investors in tax-free bonds.

Meanwhile Argentina is raising $15 bn of new money on global bond markets to pay back its holdout creditors (mostly from US hedge funds) and finance its recovery from neo-Peronism.

THis newsletter is being re-sent Friday as a result on non-receipt Thursday.

Our webmaster reports from Nova Scotia that he blocked a spammer IP address attempting to add “tons” of users to our website. We do our best to deal with these attacks but ultimately it will require a costly redo of the website. And no, we will not hire Chinese hackers to help Andrew.


More today mostly on Latin America and banking, but not only for paid subscribers including a company report.

Read more »

Poor Puerto Rico, Our Greece

Thu, 2016/04/14 - 12:39pm | Your editor

It is much better to lend to an unrelated political entity than to one in which your country has an interest. After the shambolic refinancing of Greece by the European Union and the still incomplete attempts to salvage broke banks in Cyprus, Portugal, and Austria, the same lesson can be drawn over the plight of Puerto Rico and its creditors, most of whom are US investors in tax-free bonds.

Meanwhile Argentina is raising $15 bn of new money on global bond markets to pay back its holdout creditors (mostly from US hedge funds) and finance its recovery from neo-Peronism.


Our webmaster reports from Nova Scotia that he blocked a spammer IP address attempting to add “tons” of users to our website. We do our best to deal with these attacks but ultimately it will require a costly redo of the website. And no, we will not hire Chinese hackers to help Andrew.


More today mostly on Latin America and banking, but not only for paid subscribers including a company report.

Read more »

India Part I

Wed, 2016/04/13 - 1:43pm | Your editor


A friend, Shashi Tharoor, a former UN official now a Congress Party politician in his Indian homeland, is one reason I am enthusiastic about investing there despite the problems hitting Narendra Modi's economic reform plans. A second article about how India is shooting itself in the foot by retroactive tax collection efforts is pending copyright clearance to reprint it. Meanwhile, here is Shashi on slogans from his twitter account, which has 2.7 million followers, including me:


“My idea of India celebrates diversity, but our ruling party prefers uniformity, built on a triad of Hindi-Hindu-Hindustan, all of which are essential to India but not sufficient to exhaust the idea of Indianness. In doing so, I pointed out, they are undermining the basic ethos of Indian democracy, which recognises [sic] the nation's diversity and celebrates multiple ways of being Indian.

“The BJP and its fellow travellers have also made something of a fetish of nationalism as the major issue in the country today. I [made] efforts to amend the law on sedition, through a private member's bill that (unlike my bill on Section 377) has been successfully introduced in Parliament.

“'Anti-national' is a label too easily applied to anyone who chooses not to conform to the BJP's view of Indianness. Chanting 'Bharat Mata ki Jai' [ed: 'Victory for Mother India' or 'Victory for Mother Goddess India' depending on translation] has become the latest acid test of Indian nationalism. I argued that no Indian should be compelled to mouth a form of nationalism he does not feel.

“The magic of Indianness is that you can be a good Bihari, a good Muslim, a good leftist and a good Indian all at once. Our nationalist heroes created a nation built on an ideal of pluralism and freedom: we have given passports to their dreams. The BJP would sadly reduce the soaring generosity of their founding vision to the petty bigotry of majoritarian chauvinism.”


The website is still facing distributed denial of service attacks. Even if the attackers cannot log on to our site because the “captcha” process requires that they copy a blurred message to prove they are human. But having lots of open “captcha” signups stops our emailed blogs from going out. Neither our webmaster nor I know what to do about these attacks which appear to be from China. I assume that the system will be cleared up with by our current hosting site or another we may move to soon. Ain't technology wonderful?


More for paid subscribers today from the producers of black-gold, medicines, motors, IT, and other favorite stock sectors.

Read more »

Tuesday's Child

Wed, 2016/04/13 - 9:27am | Your editor

My Tuesday blog appears not to have gone out yet. Please visit where you can sign in and read it, or that part of it you are allowed to read as a pre-subscriber. Our webmaster does not appear to be responding to emails so I cannot figure out any other way to deal with this.

If the same thing happens to the Wednesday blog please also go to to read it.

apologies, vivian

Non-US: Active vs Passive (Re-send)

Tue, 2016/04/12 - 2:55pm | Your editor

An argument that active managers do not in fact underperform passive ones from Citywire in London writing about the performance of investment managers in the UK and Europe, where we hang up our hat too, taking issue with the analysis published by Standard & Poors:

“Every research house has its own methodology, [as] has Citywire, more of which later. The analysis is from S&P, based on their SPIVA scorecard. They ensure there is no survivorship bias and allow factors such as style consistency, asset weighted performance, and equally weighted performance to be measured.

“Their numbers stated in the article was 75% of UK equity funds underperformed over 10 years. Citywire’s findings are the polar opposite.

“I couldn’t believe 75% of active UK equity funds underperform. I thought a monstrous typing error had passed through the report’s editors. They were looking at performance over a decade. Active management has been struggling in some areas, but the reality is active management in UK equities has been producing stellar performance for investors.

“Every research house has its own methodology. Citywire stitches together the performance of fund managers as they move companies as long as they remain in the sector. It's different from the fund angle and in the UK All Companies sector, of individuals with a 10 year track record, 68% outperform.

“This is based on managers who have an information ratio of zero or more, taking into account all costs. It also includes funds they used to run which are closed [so] they can't hide from the skeletons in the cupboard. The information ratio is appropriate here as we assign benchmarks at the fund level given some remits for example are purely in large caps.

“For those who prefer to take a default index for a sector and see how many have beaten it, the number is still 68%, based on the FTSE All Share [Index] (including dividends) as a benchmark, based on total returns after costs. This figure doesn't include mid cap managers who would inflate the numbers on a total return basis due to strong performance. They're carved out into their own sector.

“Finally, on an asset-weighted basis, taking the managers with 10 year track records, 75.8% of their assets are run by outperforming managers. Active management is alive and well.

“There is a stark comparison with US equity fund managers: over 5 years just 10.9% of them outperformed their benchmark. Indices for managers in US equities are selected based on style and the market cap managers invest in, with small and mid-cap managers placed in separate sectors.

“This compares to 77.4% of UK equity fund managers [who outperformed their benchmark over 5 years]. No wonder money in the US has been flowing out of active mutual US equity funds and into passive funds from the likes of Vanguard, and [into] assorted exchange traded funds.

“In the UK, mid cap and small cap [picks] have been key to performance. Recently the general theme has been to be underweight the struggling energy and mining sectors. There's been no escaping this through passive exposure.

“The ability to outperform as an active manager isn’t just about stock picking skills and where you invest. It's also where you don’t invest, and not being swayed by the makeup of the index. Passive can have a role to play in portfolios but looking through the rear-view mirror can prove to be investors' undoing.

The table below shows outperformance of managers tracked globally by Citywire in key sectors, based on them having a positive information ratio, over various time periods.

“In the US High Yield sector, just 9% outperformed over seven years. Hence the rush to passive allocations. This time-frame is significant as it captures the whole market rally since March 2009. But over 12 months it's very different. A massive swing, as 55.1% outperformed, mainly due to shunning the energy and commodity space.

“European equity fund managers also bounced back over the past year but the ability to outperform in the US remains challenging. Global equity managers have been struggling. But the changing environment over the last year has seen 40% outperform.

“As the investment cycle moves from the QE-induced free lunch, active managers can prove their worth even in US equities where valuations around consensus positions are stretched on a number of measures. Remember it's not just about stock picking but also avoiding the landmines. “[Ed: Citywire's fund manager analysis covers timeframes to 28 February.]

For the record, our newsletter covers Canadian stocks and American Depositary Receipts, plus foreign stocks which can be traded freely on US markets. Canada has no ADRs because there is a trading system operating across the border at most firms (except Interactive Brokerage). The other main non-ADR country is The Netherlands, where the world's oldest Beurs (stock market) allows trading to take place wherever a buyer and a seller get together. Many Dutch stocks trade on US exchanges as “New York shares.” We treat them as the equivalent of ADRs.

We also increasingly cover shares which trade only infrequently on US markets which are better covered overseas in open markets like Japan, Hong Kong, or Singapore.

ADRs and other shares we write about are not US stocks. Many are British, but of course not as many as Citywire wrote about above,

More news today from Britain, Israel, India, Australia, Canada, Denmark, Finland, Germany, Brazil, and a few other places.

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