The Sisters Mitford's Problem

Mon, 2014/02/10 - 12:32pm | Your editor

While I failed to finished the book during my London stay, I learned from the memoire, by Deborah, Duchess of Devonshire, why two of her 5 Mitford big sisters became Nazis. The book is "Wait for Me" and I had to return it before reading to the end.

Deborah's sister Diana eloped with British Fascist Sir Oswald Mosley. Unity so admired Hitler that she tried (and failed) to commit suicide after Britain declared war on Germany in 1939. The only son, Tom, refused to fight against Hitler because he was a kind of Fascist, but agreed fight against Imperial Japan and was killed in Asia.

Another sister, Jessica, became a Communist while Deborah helped found the Social Democratic Party with her husband, so two count as leftish.

The six daughters and single son of the Baron Redesdale, the Duchess reveals, were raised in a household which observed the Bible's Leviticus rules about what meat and fish may be eaten. They ate kosher-ish under the regimen of their eccentric but strict "Muv" and "Farve". Deborah never tasted lobster before she made her debut. Shrimp and oysters were forbidden. No bacon accompanied their eggs. A Sunday roast never was a ham.

All this works if you are named Waley-Cohen but causes grief to Mitfords. Their parents also sometimes tried out Christian Science but never as seriously as Kashruth. The fish-with-fins-and-scales only rule was imposed on the offspring, plus a ban on animals who do not have cloven hooves and chew their cud. Son Tom, sent to Eton despite the family's poverty, could eat whatever was served but the home-schooled girls had no escape.


Thanks to Singapore and a Vancouver readers, your editor is becoming a Mary, Mary (quite contrary) about the need to sell bonds and buy shares, while fleeing emerging markets. Every single macro analyst (at 13 global banks and funds) said to overweight global equities; every single analyst said to underweight fixed income. This is supposed to be the sole way to play the taper of the Fed's quantitative easing policy.

The Absolute Return Partners newsletter examines skeptically the case for this consensus on the taper zapping bond markets. It questions whether there is "an emerging markets" crisis which will grow more serious as the US cuts its liquidity feeding the rest of the world. It notes that there is an offsetting set of flows, from the US current account deficit.

With the beginnings of a US energy boom and US recovery, deficit spending is set to rise. That will not result in inflation or in US bond yields rising, but instead will generate $400 bn or so of foreign claims on the US. This money will be placed (as always) in US T-bonds, further pushing down yields.

Moreover, US pension plans had a notably successful 2013 and are now 92% funded, a level which was not supposed to be reached until 2017. The plans will buy more US T-bonds this year in a risk-off play after taking chances last.

The newsletter cites a mostly Danish quant shop, Applied Global Macro Research, whose proprietary model names the drivers of the US 10-yr bond yield. "Even in a strong economic environment, the model suggest that the total return on 10-yr T-bonds in 2014 will be close to zero. Yields [will] rise modestly, but the carry will almost fully offset those losses. On the other hand, should the US economy actually weaken, 10-year T-bonds should generate very attractive returns." I would love to see the Danish report.


Here is an unexamined stock idea in the USA from my favorite CFA; with all the revelations of credit and bank account hacking, you might consider buying into Target whose Xmas sales were hurt by fear of leaks of its house credit card data. A UK newspaper, The Daily Mail, reported today that Barclays Bank suffered a breach of 27,000 full client files sold to thieves. The files included information on the bank's clients' earnings, savings, mortgages, insurance, passport, and national insurance and health data. The potential losses are almost unlimited. (The CFA is my son who manages our corporate profit-sharing and pension plans.)

What this means for one of our companies is written up for paid subscribers below. More for the paid-up contingent follows from Israel, Britain, Finland, Spain, South Korea, Canada, India, China, The Netherlands, Brazil, and Portugal.


Read more »

Tables Posted

Sun, 2014/02/09 - 6:28pm | Your editor

I have just posted the performance tables, the current lot of holdings for the cognoscenti, or paid subscribers, and the closed positions for the whole world. Use the "printer friendly" button to view spreadsheets more easily.

More for paid subscribers follows. Read more »

Post-Brunel British Engineering

Fri, 2014/02/07 - 5:43am | Your editor

This is the last London blog as I return to NYC over the weekend. Even apart from my sister-in-law's horrible fall, it has been tough going. It is something of a gap period in the theater so the only play we went to was Mamma Mia, on the West End.

Our dinners out were better than in Paris (heresy!) but there is a new offputting trend: grazing. You go to a Spanish joint and you get lots of tapas, which is traditional enough. But there is no follow-up main course that traditionalists like me, brought up not to nibble between meals, have waited for.

Another problem is that there is nobody but me who can clean Mudchute Manor. Our last char, a young Ukrainian, has probably gone home to occupy the Maidan. Her predecessor, a beefy Brazilian, has a kidney condition and cannot work. The one before, an Angolan, has completed her course in slipcover making and is now running a business. So I am the mopper and my husband vacuums.

My sister-in-law's operation was delayed three times because there were no available beds at her local NHS hospital, and now will be rescheduled next week when we cannot help out or cheer her up.

More for paid subscribers follows from Canada, Israel, Britain, Portugal, Spain, Brazil, Australia, and Brazil.

Read more »


Thu, 2014/02/06 - 9:04am | Your editor

According to polls, the greatest Englishman ever was Sir Winston Churchill who had an American mother. And the second greatest was Isambard Kingdom Brunel, an engineer who lived in the first half of the 19th century and had a French father. Brunel is well commemorated in London. When we take the Eurostar to Paris and back, our London station is Paddington's Egyptian-inspired halls, designed by Brunel. Our local pub and youth hostel in Mudchute Manor is called The Great Eastern” after Brunel's steamship which was launched into the River Thames nearby.

We used to regularly visit relatives in the West Country via the Great Western Railroad, my Somerset father-in-law, and my husband's Devon-based aunt-stepmother, before they died. Teh GWR too was designed and built by Brunel in the 1830s. Now its long westernmost section, running from Exeter to Penzance, is out of operation after a tidal wave took out the seawall Brunel built in Dawlish, Devon, to keep the sea from flooding the railway line.While British weather doesn't seem to be as excessive this winter as what hit the USA, it is still extremely harsh.

The London Tube strike continues and now has affected us, as my sister-in-law was to be operated on this morning but it was canceleld. She fell and broke her right elbow, tripping over a paving stone that had become displaced by tree roots and heavy rain. We visitors always tread very carefully along the sidewalks in London because they are very uneven, but her accident took place a matter of yards from her front door, and she knew the levels well before the floods hit. The paving of London streets is funded by local councils which often have more important things to spend on like housing, kindergartens, or social centers.


More follows for paid subscribers today mostly catching up on closed-end and exchange-traded funds, plus news from Brazil, Guinea, Finland, Britain, Belgium, The Netherlands, Israel, India, Mexico, Spain, and Canada.

Read more »

British Chaos

Wed, 2014/02/05 - 8:46am | Your editor

Back in Blighty just in time to avoid total London chaos on Weds. With a 48-hour politically motivated Tube strike, London has become locked down as Bob Crow, the union leader, takes on Boris Johnson the Mayor. The battle is over about 650 jobs on the Underground which will end with the closing of ticket booths. Nearly half those whose jobs will be ended have accepted compensation or reassignment, and many others are studying their offers. The Tube wants to provide 12-hour service on weekends and otherwise expand its business.

The strike was not called by the affected workers, but by the union leader who will lose members (and their dues). The Docklands Light Railway is operating. The buses, packed upstairs and down, are also rolling. They have different unions. But I am grounded.


It looks like there is a bipartisan congressional consensus in favor of the Keystone XL pipeline if only because it is likely to be safer than hauling black oil and gunk by railway from Canada's oil sands to Gulf ports. We sold out of the chief hauler, Canadian National Railway (CNI) because of rail risks.


More news from The Netherlands, Belgium, and Luxembourg (a Benelux trifecta!), Norway, Britain, Brazil, Hong Kong, Ireland, Scotland, and China. This is a double issue because I was travelling yesterday.

Read more »


Mon, 2014/02/03 - 9:27am | Your editor

Corrections are only for paid subscribers and here is one:

Read more »

Rugby and Reactionaries

Mon, 2014/02/03 - 7:19am | Your editor

The advantage of having two separate series of Chinese purchasing managers' indexes, one official featuring big state-owned enterprises and the other, from HSBC, for smaller and more private companies, is that you can have two China-generated selloffs in a single month. The Jan. data from the official series showed a modest 50.5 level of order increases. Anything over 50 means that growth is expanding, if modestly. The Dec. official level was 51 so the level of increase is falling.

But what really hit the markets in Europe this morning was that Japan sank into a formal correction. Copying the Friday US selloff, China, and fear of the yen rising too hard, Japanese stocks fell enough today to push the Nikkei index down 10% from the period right before Xmas, which counts as a correction.

Three big events took place on Sunday, two of them in Paris, and the 3rd the NFL finals. The first major event on Sunday was the first round of the International Rugby tournament, where England was soundly beaten by France. The second was a demonstration by what Le Monde headlined as “reactionaries” against abortion and gay rights in France. There is no pretense to objective news in France; Le Monde is identified as leftish and Catholic.

In reply to a San Francisco-based gay reader, I wrote why I did not join the anti-reactionaries demonstrating here. First I am a foreigner; second it was cold; and third I had touristy things to do. But for whatever it is worth, in central Paris, even around Notre Dame Cathedral, I saw more rugby fans than demonstrators on either side of the sex debate.

We did manage last night to dine well and inexpensively in Paris, at a traditional restaurant near where we used to live called L'Ambassade d'Auvergne. Cost was euros 92 for a pair of excellent 3-course menus plus wine, better than anything we could get for that sum in NYC. They feature a dish called aligot, southeastern French peasant food, a sticky mixture of mashed potatoes, garlic, oil, and Cantal cheese, served as a main with excellent farm-raised duck breast. They used to feature a sausage called AAAAA andouillette but the headwaiter said the man who used to make it is no longer doing so, and they have not found a substitute. To maintain standards they switched to magret de canard.

There will be no blog demain as we are tunneling back to London. News today from Canada, Israel, Britain, France, India, and Thailand. And a new more or less French stock pick.

Read more »

Updated Tables Posted

Sun, 2014/02/02 - 6:55am | Your editor

Greetings from Paris where we have mostly had disappointing meals and where I have been turned down by two potential stringers, called 'pigistes' here. Unlike my US writers they want either to be paid by the written word in French, a much more verbose language than English, or want more per published word. Since I have writers in many developed countries who contribute to the newsletter against my standard fees I am shocked, shocked, at Frenchy greed and I will probably continue to cover France myself, despite my contacts getting long in the tooth.

I also picked up a virus from the Numericable French Internet site, removed but not before it cut me off from my own website. My husband has caught a bad chesty cough and keeps me from sleeping. And the meals we have had in Paris with old friends have all been disappointing, either inedible meat (which I am assured no longer is horse disguised as beef but merely bad beef!) or the scattiest service at a local bistrot where the wine waiter never came by to take our order nor did a waiter give us bread, before they served us our first course. It was not as if they weren't French, and everyone came by to practice their English. But nothing was actually delivered to our table.

So my view is that the country is like many others going to the dogs, even without considering the shenanigans of the President and his former mistress. Everyone here believes she shattered a valuable Sevres vase on his head in a euros 3 mn rampage before she was exiled from the Elysees Palace.

After killing the virus with difficulty I posted my tables. There are general results for the public at large and reports on our stocks, bonds, and closed-end and exchange-traded funds (and a few holding companies) exhibited only to paid subscribers. More follows for them below.

Read more »

Club Med and Canada

Fri, 2014/01/31 - 8:05am | Your editor

This will be the year of Euroland's Club Med countries and Canada, which will replace the BRICS.

The American Depositary Receipt market is doing well for banks and underwriters according to Citigroup. Not however as well for investors.

In 2013 companies (mostly from Russia, Taiwan, and China), raised $10.5 bn with ADR and global depositary offerings, primary and secondary. About 54% of the issues were initial public offerings. The total of capital raised fell 16% from levels of 2012 for lower-rated companies having less appeal.

The number of unsponsored ADRs trading hit 1,575, a 4 year high. Depositary banks like unsponsored ADRs because they can collect higher fees than with sponsored ones.

There are measures being considered by some of the emerging markets countries to ease regulations limiting DR issues, which may go some way toward offsetting the market uncertainties caused by Euroland plots to impose a financial transaction tax on trading in shares issued by Euroland companies, bought or sold by Euroland shareholders, or using brokerages or banks from the EU as intermediaries in the trading.

While the main vehicle for global diversification remains mutual and exchange-traded funds, the ADR market has also achieved a place in the panoply. In 2013, despite all the negatives, traded volume of 14.7 bn shares remained virtually from from 2012, although there was a bit of a cheat involved, as the price levels of the most heavily traded ADRs was lower last year.

If the move into European markets last year continues, it should help the ADR market. US purchases of euro-land stocks in 2013 were at the highest yearly level since the common currency was created in 1999, according to the Financial Times. Euroland potentially can replace emerging markets as a destination for US investors looking for better growth and yields—with less interest rate, political, and other risks. Gun-shy investors should be lured into Portugal, Italy, Spain or France (where I am right now) as they shun such hotspots as Ukraine, Thailand, Turkey, Argentina, or Venezuela, and worry about the BRICS (Brazil, Russia, India, China, and South Africa). They will venture into the Club Med lands.

Through the end of Sept., inflows into funds investing worldwide were heavy, topping $113 bn as investors sought diversification.

US-Canadian relations may improve and result in more flows northwards after the likely decision to be released perhaps today by the Dept of State. Foggy Bottom is expected to decide that pollution will not be increased if the Keystone XL cross-border pipeline is built. It would transport Alberta oil sands heavy crude oil to US refiners and users, and to Gulf ports. The argument is that the oil sands will be developed in any case without a TransCanada oleoduct. Pres Obama said he would not approve the pipeline if it would increase carbon pollution.


More for paid subscribers follows from Ireland, Spain, Israel, Mexico, Brazil, China, Panama, Finland, Colombia, Costa Rica, and Canada.

Read more »

No Emerging Markets Rout II

Wed, 2014/01/29 - 6:39am | Your editor

Last night the long-awaited Turkish central bank (CB) rate hike took markets by surprise although higher rates to fight inflation were expected for weeks. Turkish interest rates went from 4.5% to 10% in one fell swoop to try to shock lire short-sellers. This led to some reversal of the anti-emerging markets trend reported yesterday sending stocks up not only in Turkey but all over.

The exception is Argentina, where the CB sold over $100 mn worth of peso bills (at the official rate) for 90 days yielding a whopping 25.89%. And if you have dollars the CB will also sell you dollar bills yielding 4%.

I got an article by William Pesak of Bloomberg from an Asia-hand reader. Pesak unsurprisingly wrote that Bangkok stocks and the baht remain under pressure as Thai factions fighting for political power prove murderously ruthless, likely to bring the economy down. Frankly, under haplessYingluck Shinawatra's leadership, favoring stupid rice subsidies to keep northern anti-Chinese anti-Bangkok redshirts happy, the economy is hardly going up. The street battles and the coming royal hiatus increase the ferocity of red and yellow contenders for power. (NB: Both King Bhumibol and the Shinawatras are of part-Chinese ancestry.)


Regulars like me know that rather than making your way through the underground rabbitwarren at Canary Wharf to connect between the Docklands Light Railway and the Underground's Jubilee line, you get off at Heron Quai, the stop before, and cross Bank Street to the escalator that takes you right to the subway. Across Bank Street, no. 25 is an undistinguished but cursed modern building.

It was built for Enron traders, but bankruptcy kept them out of it. So Lehman Brothers took the lease. In late 2008, pictures of tearful or stiff-upper-lips employees carrying their personal belongings out of No. 25 after Lehman went bust made all the newspapers.

The next tenant was JP Morgan-Chase, and No. 25 became home to “the London whale”. Despite his best efforts, he didn't cause more than a $7 bn loss to JPM which survived.

Yesterday a JPM employee plunged to his death from No. 25, landing on the roof of a lower Canary Wharf commercial building. Beware the curse of No. 25.


Siemens is de-listing its SI ADR which it says has nothing to do with charges by Snowden that its internal communications were hacked by the NSA.


Tomorrow there will be no blog as I am off to Paris. Since the French are having one of their quaint air traffic controller strikes, I must ride the Eurostar train midday through the Channel rather than flying. More for paid subscribers follows from Britain, Spain, Israel, Canada, Norway, Ireland, and Singapore.

Read more »