Brokerage Problems Again

Thu, 2017/08/31 - 1:52pm | Your editor

My first horror tale has hit with the Schwabians who are now my main brokerage. I received from San Francisco an envelope marked “Personal and Confidential”. It contained a letter saying that there was something I needed to know followed by a colon and a blank line and nothing more. Then Schwab thanked me for being their customer and gave a number for more information.

I naturally called the number on the letter to find out what that was all about and after being on hold for 45 minutes got a human. He named a Canadian stock I and my readers had tendered which was being taken over. Asked what about this new, he said he would look into it and call me back. I explained that he needed to call my home rather than my office and thanked him.

Nobody called after that until my bedtime. Naturally nobody called before I went to work (from the west coast). So I called again. The message was trivial. The tender offer had been extended until Sept. 6. As I had already accepted and opted for cash or stock in the acquiring firm there was absolutely no reason to write.


If the company felt the need to do so, the news was not that private or confidential and required no action of my part. All these people keep saying “great” and promising to “reach out to you” which sets my teeth on edge.


But just to be safe I called Schwab again this morning and they looked into it and just called back. After all that effort it turned out that the stock in question was a totally different one, from Germany, and there really was an important change. However I had already learned about it by reading the website today and then checking in with Reuters.


Today PM Theresa May told journalists she had no plans to resign, and would fight the next parliamentary election on behalf of her Tory Party. This is what the French call “un pari stupide”. Today also the Sinn Fein of UK-run Northern Ireland, the local arm of the same movement in Ireland itself, said Ireland should block talks about future ties between the two bits of the Emerald Isle between Britain and the European Union. They cited not only the open border between Ulster and Ireland but also the need for continued jurisdiction of the European Court of Justice on the human rights clauses of the treaty.

After she lost her Parliamentary majority in the June election, Mrs May was able to stay at 10 Downing Street only thanks to the support of the Protestant Democratic Unionist Party's seven Members of Parliament in Westminster.


Next Tuesday will see the start of 2-day settlement for US stock trading, faster than the current 3-day way. And there is other news as well of even greater importance to global investing adherents, ranging from how to blackmail an acquiring company to how to pay for foreign inputs quickly and securely with the blockchain. Paid subscribers should read on.


More today from Canada, Chile, Spain, Israel, Germany, Switzerland, Sweden, Finland, Argentina, Australia, Britain, Brazil, Greece, the Dutch Antilles, and India plus a company quarterly and another company's annual report.

Read more »

Creating Indexes

Wed, 2017/08/30 - 12:19pm | Your editor

Melania Trump's Slovenian grandfather was a genetic scientist. One of Donald Trump's uncles was a nuclear physicist. Maybe some scientific insights into how global warming causes 500-year storms of horrendous proportions may penetrate the ill-educated brain of our president who never seriously studied science.

Your editor tends to favor active stock-picking over buying an exchange traded fund to passively track an index. My main reason is that my newsletter is about active investing. And because our small-cap and under-the-radar finds can outperform cookie-cutter ETFs.

This week's Economist challenges how indexes are now created in the wake of the Dow-Jones Industry Average, which went live in 1896. Dow famously is weighted by share prices in dollars rather than by market capitalization, which was the only way it could produce a number quickly in the era of ticker-tape machines. But index distortion has not ended just because the number-crunching now is easier. Read more »

Another Scary Day

Tue, 2017/08/29 - 1:43pm | Your editor

Asian markets are being roiled by fear of North Korean aggression after it sent a guided missile straight over Japan. Meanwhile, AsiaTimes, a website, today published an article by Bill Gertz in which he argues that “the two recent collisions between US Navy warships and commercial ships have raised the specter that China was behind the 'accidents', using electronic means to disrupt or fool radar or navigation systmes into creating deliberate collisions.” He cites unnamed military experts and adds “there are signs the People's Liberation Army is preparing to use exotic electronic attacks in a further conflict.” Gertz is an author (of a half dozen books, the most recent of which is The China Threat) and national security columnist for the conservative Washington Times.


Right now stock markets are digesting the Houston hurricane and there are moves that one might not have anticipated. The latest horror from the post-hurricane deluge is that two reservoirs19 miles from downtown burst its banks and the levee south of the city has been breached by floodwaters. Six nore Houston suburbs are now in the flood zone and their residents are being told to evacuate their homes.

Of course the insurance, energy, and aviation industries are taking a hit. But so is Mexico. Its peso is down more than 1% against the US dollar, the biggest drop in several months, a reaction to lower crude oil prices, according to Eduardo Garcia, writing from Mexico City. Of course new Trump threats to make Mexico pay for El Muro (despite his having told his Mexican counterpart that he would settle for a fake payment) hardly helps.

The other threatened Nafta country, Canada, a major energy producer, is also suffering stock market drops—except for gold miners.

One exception to the Asian selloff is Thailand whose SET rocketed up nearly 2% today with the 2nd highest volume ever recorded, writes Paul Renaud from Phuket. The Thai baht also rose. He attributes the move to the long-term destabilization of Thai politics by populists having ended “with Ms Yungluck fleeting the country as did her brother Thaksin Shinawatra.” He adds: “political factions will be tamer and more humble now”, predicting a “more stable era and a more confident stock market.”

Eduardo edits and Paul edits We exchange news and ideas with them both.


More today from around the globe including two corporate results and news from Brazil, Colombia, Canada, Mexico,India, South Africa, Kenya, Israel, Australia, Spain, Finalnd, Hong Kong, Britain, Ireland, and Switzerland.

Read more »

Hurricanes and Other Risks

Mon, 2017/08/28 - 12:49pm | Your editor

My Paris-based Chinese-American friend who mastered Schwitzerditsch to gain a third language after she married Uli has died. I said Kaddish for her, although she was (of all things) a Lutheran, over the weekend. The passage read from the Torah included the famous words “justice, justice, shall ye pursue” which certainly described Sylvia, who was a volunteer for everything from visiting Jewish old-age homes to chat in her rudimentary Yiddish to organizing French-resident Americans to petition their native land, most recently against Trump's conflicts of interest.

She will be missed.


You may wonder why the closing of docks, refineries, and pipelines in Harvey-hit Houston has led to lower crude prices. But if Texas is not buying crude, there is less demand, even if there is a shortage at the pumps. The price will rise again after Houston dries out. The dollar is also down because Houston is an export port for gasoline and other refinery products.

Meanwhile the haven commodity today is gold, helped also by a trend among central bankers last week to talk less about hiking rates. Higher interest rates hurt gold demand because the yellow metals doesn't produce earnings, and therefore holders are losing more.


My Sunday blog did not go out correctly so I included the major note for paid subscribers again today. We have news from Israel, Denmark, Switzerland, Ireland, Brazil, India, Hong Kong, Canada, and Australia today.

Read more »

Sunday Tables Posted

Sun, 2017/08/27 - 12:16pm | Your editor

I just posted the updated tables at as I usually do on Sunday. For a change we are having Thai food rather than Chinese this week. Please visit the website to see what you are permitted to view: the closed-positions for all; and the current tables of stocks and bonds, and closed-end and exchange traded funds for paid subscribers only.

Read more »

Perils of Passive

Fri, 2017/08/25 - 1:42pm | Your editor

Mexico's current account deficit super-shrank to $321 mn in Q2 compared to $8.398 bn in Q1, the Mexican central bank said today. The deficit in the April-June period represented 0.1% of gross domestic product. You could say that is the real Trump bump. Meanwhile north of the Rio Grande, summer labor shortages are hurting not just the tourist industry, but also other service sector employers dependent on foreign labor during our vacation time. I note that two of my grandchildren are back in school now. Back in the dark ages when I was a teenager I worked as a summer replacement in NYC learning how to run a switchboard, write to customers, work an adding machine, and other useful skills for later life.

John Llewellyn from London commented today on the spread of exchange-traded funds and the passive investing they are used for. ETFs now account for $4 trillion in global investments, of which $3 trillion is in the US, triple their 2010 level and double their 2013 level. As much as 40% of US domiciled equity funds are now passively managed. Around 30% of equity trading in the US is by ETFs. Vanguard alone owns at least 5% of all the S&P 500 companies. Obiously, ETFs are a cheaper way to buy stocks.

So far, ETFs only account for about 10% of overall US market capitalization, and barely more than 1% of the more complex US bond market. Although debt-security and “smart” ETFs account for very little of the current market, they are the fastest growing parts of it.

He warns that while they offer attractions to investors, “their spread may bring an enhanced risk of market dislocation and turbulence when the current bull market finally ends.

He adds: “Critics worry that they undermine the price discovery process; encourage momentum investing; undercut the role of fundamental research; raise counterparty risk; foster liquidity mismatch between underlying securities and the fund [which own them]; increase volatility; and promote bubbles.”

He concludes: “ETFs remain largely untested in a crisis, and may exaggerate asset price declines in times of market stress.” John is the former deputy chief economist of the Organisation for Economic Co-operation and Development whom I know from Paris, who now runs Llewellyn Consulting, whose new email address is


More today from Israel, India, Ireland (a trifecta), Mexico, Britain, Canada, Chile, Germany, Denmark, South Africa, Brazil, Colombia, Bermuda, the Dutch Antilles, Japan, including companies reporting, the last pile-up before the next quarter results come out—I hope.

Read more »

Oh Canada!

Thu, 2017/08/24 - 1:09pm | Your editor

Your editor has just accepted another gig, this time unpaid volunteer work. I will become the new editor of the Sutton Area Community's SAC News Bulletin, which will also result in my getting a seat on the SAC board. My payback will be indirect, through the valuation of the neighborhood where I have lived and worked for over 25 years, and where we own an apartment and my office.

I have already written here about the threat to our quiet area from overweening high-rise apartment apartment buildings being sold to exotic oligarchs to launder what are often ill-got gains. The nearest one (whose foundations are being laid now) is a block and a half from this office which we own along with our apartment. The locals are fighting the latest builders, an outfit called Lend-Lease which bought out the site from the bankrupt Bauhouse Group, and so far the city has not issued permits for more than the foundation. Parties of Chinese periodically arrive by bus with paperwork showing the plans for a 99 story monster. We locals are against it because it will cause problems for our views, parking, sewage, and quality of life.

A countervailing factor is the development just across part of the East River from here of Roosevelt Island (formerly Welfare Island where among those hospitalized was Ezra Pound). The first homes built on the island combined Mitchell-Lama subsidized rental residences for the poor with what were then cheap coops just a short distance from East Midtown by the gondola (mislabeled as a tram—it is more like an aerial ski-lift). More recently the F train was also diverted to Roosevelt Island.

There a monument to FDR's Four Freedoms was finally built a few years ago. However the Queensborough-Koch Bridge does not give pedestrians or cyclists access to the island, so far at least.

Now the island will become a graduate tech campus for a jv between Cornell and Haifa's Technion Institute of Technology which will be working on block-chain systems. Both sons of my Israeli first cousin Esti are Technion graduates.

A new way to reach Roosevelt Island will go live next week, a ferry. It will take people to either Astoria in Queens or E. 34th St. in Manhattan in 20 minutes. Apart from the UN, which is a key element in our neighborhood. Cornell also has a club near here (where the Technion deal was partly negotiated) and its “Downstate” Medical School. I imagine most of the faculty will aim for East Midtown rather than the outer boroughs which should help our real estate valuations if the monster tower is stopped.

There is not much I can do about the Trump Tower which also dwarfs our residential area, because it was put up on business streets, 5th and Madison Avenues between 57th and 56th Street. Its location means that the President, First Lady, and I voted for different presidential candidates last Nov. at the same polling place, the school on 56th St.,


Eduardo Garcia writes that Mexico is about to allow a second stock market to open after more than 100 years of only allowing a single “Bolsa de Valores”. It will be for smaller-cap or higher-risk firms.


Execs from some top European companies operating joint ventures in China are joining forces to try to block political pressure being exerted by their state sector partners to give Beijing and their required Communist Party unions more say over business and investment decisions. They also fear that technology they bring to jv's is being used to compete with their European wholly-owned operations.


More for paid subscribers starting with a take-out on Canada, and news from Brazil, Israel, India, Hong Kong, South Africa, Chile, Switzerland, Germany, Japan, and China. We have a buy and a sell today.

Read more »

Checks and Balances

Wed, 2017/08/23 - 11:56am | Your editor

Windows10 persists in updating my new laptop bought last week, and blocking my access by changing or removing my sign-in password. I had to again call Microsoft in India, where I was connected to Mohammed (who no longer can divorce his wife if he has one by saying “talak” three times). He was very helpful in part because the instructions on the microsoft site for changing your password are not clear and do not work unless you go vvveeerrryyy slowly, not my speed of choice. The great windows system is being seriously undermined by poor updates and I think Indians should be employed in looking out for bugs before the update—which customers are unable to block—goes out and screws up their computers, rather than in helping undo the damage. This is the second time in 4 days that my desktop became inaccessible, and what is truly annoying is that when I am in the reset password mode it knows my old password and won't let me reinstall it—but it won't recognize it on logging in.

It reminds me of other great technologies that bit the dust.

  Read more »

Back to Work

Tue, 2017/08/22 - 12:55pm | Your editor

BofA Merrill Lynch summed up yesterday's Wall Street action well: “total eclipse of the trading”! Apparently lots of bond dealers went off to watch the eclipse and only $4.4 bn was traded in high yield issues when $3.4 bn of these bonds (once called “junk bonds”) had been issued. Equity markets also were pretty inactive.

One result is that my new brokerage account with Schwab faces “technical issues” blocking execution of trades which cannot be done on-line. If delayed execution hurts the client Charlie will adjust prices. Catch-up is costly.

After the warm and fuzzy street gatherings yesterday to look at the eclipse, and a slower pace of reports and news even by the standards for August, things are turning more normal today. Starting with Washington.

Another US president has ventured into the Afghan quicksand and is sending troops with an open-ended and undefined mandate.

The North Korean conundrum, unlike the solar eclipse, lives on with new revelations that Kim Yung-un's regime is supplying illegal nerve gas to Syria's Basher Al-Assad, also used to kill Kim Jong Un's brother in Kuala Lumpur airport. While I am no fan of Steve Bannon's his summary of US options over Kim Jong-Un is spot on. Pyongyang's threats of “a merciless retaliation” today is a deliberate attempt to extract a riposte from Pres. Trump which will again consist of empty rhetorical threats—but maybe this time The Prez has learned not to get into these kinds of slanging matches. His “fire and fury” talk early this month was beyond stupid.

At last the US Navy is looking into the spate of fatal crashes of our military ships in Asian waters. If we are going to have an Asia policy beyond insulting China, we need to back it up with a functioning military.


One thing that troubles me after the national hoopla over the solar eclipse. After all the warnings not to look directly into the eclipsed sun, why did Pres. Trump not wear protective shades like the First Lady did when he hopped onto the White House balcony yesterday? Is this risky behavior a follow-on from his refusal to believe that global warming is happening? It is lucky Our Alpha Male chief didn't look too long because then, rather than facing a possible impeachment over the Russian interference in last year's election, he might have had to resign because he was going blind. Wall Street and the dollar are both up so we are assuming his vision will survive his frequent lack of foresight. Can the USA survive it?


More today for paid subscribers from India, Canada, Britain, Bermuda, Australia, New Zealand, Hong Kong, South Africa, Jordan, Ireland, (that's just where the Red Ensign flew and Victoria Empressed) plus Israel, Japan, Chile, Iceland, Panama, and Denmark.

Read more »

Off to the Eclipse

Mon, 2017/08/21 - 12:31pm | Your editor


Of all people, it was Karl Marx who wrote: “History repeats, the first time as tragedy, the second time as farce.” And with new threats from Kim Sung-un hitting today, we are in another round of market jitters thanks to someone outside the White House for a change. As I want to view the solar eclipse today's blog is shorter than usual, mainly because many news writers and corporate PR types are also heading for the street.


So here is a hodge podge of news from around the world as the dollar weakens and Wall Street flounders a bit, with drug stocks suffering the world illnesses, financials facing fear, and tech trembling.

Read more »