Go Mo Go!

Wed, 2014/01/22 - 8:38am | Your editor

 

I don't believe Mohamed El-Erian, born an American in Brooklyn but of Egyptian heritage, is quitting as CEO of Pimco without a pivotol political or economic role awaiting him in Cairo under General Sisi. El-Erian, who left the California fund manager once before to invest for the Harvard Endowment, is in his 50s. At Pimco he led the move into equities at what historically has been a bond house owned by Germany's Allianz (insurance.). There is still need for that switch.

El-Erian admitted to me that despite spending his winter holiday in Egypt with relatives a matter of weeks before the Arab Spring uprising hit Cairo, he had not an inkling that trouble was brewing.

While a Muslim, Mr. El-Erian was not associated with any of the Islamist and Muslim Brotherhood movements. He has ”clean hands”, untainted by corrupt dealings or even presence during the Mubarak years.

Go Mo go!

Yesterday Barry Olliff of City of London, a fund invested in closed-end funds, mostly of the emerging markets persuasion (cf below for paid subscribers), produced a tirade against US lawyers, part of his 15-year campaign to clean up the CEF market.

Like a knight in shining armor, Olliff wants to clean up abuses to help institutions (like his), retail investors, Britons, Americans, and others. “Funds”, he proclaims, “exist for shareholders!”

Shareholders are ill-served by closed-end funds rife with vested interests, unaccountability, lack of independence, and excessive legalism rather than a focus on performance. There is a prevailing conflict of interest as a result, between fund boards and management, and the poor fund shareowners.

The symtoms of the problem include oversupply of copycat funds, and funds' failing consistently to seriously address the stock prices being at persistent discounts from net asset value. They track well only until the ballyhoo of the initial offering has ended.

Defender of widows and orphans, Barry charged that most US buyback programs are a matter of “smoke and mirrors”mainly because the real numbers are not revealed on a timely basis during the buyback period. He noted that many buyback offers were crafted to be uneconomic for either those accepting or rejecting the exit offer, while favoring the advisors and the boards. He also had a few sour remarks about “mark to market” accounting which penalizes US shareholders buying CEFs at the end of the reporting year, hit with an immediate loss.

Actually the latter is a result of the US tax code and the 1940 Act which requires profits at funds to be distributed annually. And some of his zeal for visible buyback programs would require getting rid of the intermediaries who run these to make sure all shareholders are treated equally (pro-rating oversubscribed tenders for example.)

Barry did not address my biggest peeve, that some fund net asset value data is not disseminated publicly, giving insiders their friends the ability to capitalize on mispriced funds at the expense of existing shareholders, buying or selling on the basis of non public information.

More for paid subscribers follows starting with news about closed-end funds, with other information from Canada, Greece, Britain, Ireland, Colombia, Brazil, The Netherlands, Israel, and India.

Read more »

Indian Tragedy

Tue, 2014/01/21 - 8:43am | Your editor

While there is still mystery about why Wall Street and foreign bourses have gone all weak-kneed in 2014, I suspect: the polar vortex producing record-breaking cold weather through much of the USA early in December and even more icily during the first weeks of the year. This seems to explain the oddball statistics on joblessness which came out since then: low levels of hiring but many people dropping out of the jobless pool because they stopped looking for work. It also may explain the rush to buy Christmas presents on the Internet rather than in retail shops, and the failure of shipping companies to get them to recipients in time for the festivities.

Today another blizzard is predicted for the USA and airports are again shut and people with jobs told to stay home.

If I am right, the current 'meh' stock US markets are not necessarily setting a trend for the rest of the year. You can read statistical projections until your eyes glaze over, but there is no simply answer telling us if by various ratios like yield or price to book or price to sales – or that old hoary favorite, price to earnings – are high, low, or normal. But has the weather been abnormal!

The Economist this week did a multi-market survey of how exchanges are too high and reader WVS asked if I was taking a defensive posture. The answer is no. My failure to adopt a selling posture is influenced by the UK stock and currency boom. Plus good yields. I have a couple of meetings later today which may change my outlook.

 

We have been decade-long friends of the talented Shashi Tharoor., civil servant, novelist, chronicler of sports and cinema history, Nehruvian policies in his native India, and (my female input) truly gorgeous-looking. Shashi worked as a UN bureaucrat and was not backed by his own Nehru-successor government when he ran to become UN Secretary General. Asian Ban Ki-Moon got the job and Shashi returned to India, leaving in NYC his divorced first wife, a professor, and their twin sons. With him went his high-maintenance new wife, a redhead unsuited for India's sun.

Shashi informed us and others of his doings by blogging. He ran for parliament in his Malayalayalam homeland and then joined the government as deputy foreign minister.

In 2010, Shashi had to resign that position because of an imbroglio over a bid he made for a Premier League cricket team in his constituency. It was for new fast 20-20 cricket (less boring than the old and very profitable for club owners.). Details are fuzzy but one Sinanda Pushker, a rich Indian divorcee then living in Dubai, may have been a hidden beneficiary of Shashi's bid.

In a few months, the redhead got divorced and left for less sunny climes, Shashi had married Ms. Pushker, and went back into the cabinet in a lowlier position. Last week Ms Pushker blogged that Shashi was having an affair with a Pakistani lady journalist, Mehr Tarar, who was “stalking” Shashi. The Tharoor couple flew to New Delhi arguing loudly on the plane. After they booked into their Delhi hotel, Shashi left for several hours and on returning discovered Sinanda Pushker dead in their room. The verdict appears to be that she overdosed on prescription happiness pills.

The overlap with the French presidential couple has made this story big. Mlle. Trierweiler, the mistress-in-residence of Pres. François Hollande (who is not gorgeous), also took too many pills in reaction over his latest lover, but as a savvy reporter she stopped in time.

 

When I vented yesterday about financial mis-allocation into Chinese real estate and shadow banking excesses, I failed to mention frothy shares. The GNP numbers came in above Beijing forecasts, but at a 21st century low. Moreover, you cannot believe the numbers.

Yesterday in Shenzhen, no fewer than 7 initial public offerings of new shares were suspended because they had risen over 45% during their first trading day. This had to be a Chinese gambling phenomenon, taking place before European markets opened, while Wall Street was shut for Martin Luther King Day.

Other ipo's have been withdrawn by JPMorgan, according to Reuters, because they are aimed at enriching the families of Chinese hired by the investment bank. Meanwhile a mega-takeover of IBM basic computers is being plotted by Lenovo. If you think the LNVGY officers haven't taken a position in Big Blue already, I have a bridge to sell you.

In fact yesterday's growth figures may also include distortions from Chinese profit seeking. The country's gross national product can be boosted by fake exports priced to give an offshore related entity gains which can be imported back into China off the books for speculation in stocks, money market funds, takeover bids, or property. So GNP may have been inflated by round-tripping RMB. That the numbers don't jibe is a long-standing problem with China. It doesn't mean that George Soros is right to short the country overall. But it does put a damper on some of the excess enthusiasm for China's miracle growth by some simplistic analysts and newsletters.

 

More from Finland, Brazil, Norway, Canada, Israel, Ireland, and Britain.

Read more »

Truncated Portfolio Update

Mon, 2014/01/20 - 9:42am | Your editor

After a valiant stuggle to use the barely functional Internet in London to update our tables, I succumbed to incoherence and did not produce a closed-end fund table today, unable to access my Barron's account or that at the Closed-end Fund Assn. Thomas B. Herzfeld, my former source, has ceased to publish this data. Because it is Martin Luther King Day many internet sources have not updated. Apologies. However, for the exotic stuff you count on me to provide, rather than the widely covered US exchange-traded and closed-end funds, I did include my data. Most of the stocks and bonds were updated normally.

I would suggest that any reader who wants to check on the discounts from net asset value of bog-standard US listed funds should invest in a copy of Barron's or sign up at CEFA which I cannot do from here. We need these sources.

 

The big news this last week was... Read more »

China Conundrum

Mon, 2014/01/20 - 7:41am | Your editor

Rumor has it that George Soros is shorting China. The multimillionaire first made a huBut there are skeptics apart from George Soros.

Euan Sterling, the head of investment at Standard Life, an insurance and fund management firm, this morning told the BBC that Chinese growth rate figures were unbelievable. He estimates that PRC growth in Q4 was “probably nearer 4% or 5%”, he told the newscaster.

Then too the Asian markets reacted very negatively to Chinese data and fell widely.

Other Chinese data today also created a sense of trouble coming. The non-bank money market credit system (shadow banking) doubled in size in 2013. This is removing Beijing's ability to control capital allocation toward the government's goals because huge waves of cash are going to where the return is higher. However, today's news that one fund sold by Industrial & Commercial Bank of China is going to miss its next dividend (right at the Chinese New Year) because of losses may wind up discouraging continued deposit rush to shadow banks. It is not defaulting, but merely missing a payment, according to its ICBC patron. But I expect huge withdrawals all the same. Will the money then go to another shadow bank in pursuit of higher interest, or into safer official savings accounts?

Another bad sign is China's continued real estate bubble. In 2013 home sales totaled the equivalent of $1.1 trillion, according to the latest figures. That is an indication of mis-allocation of capital because many of the homes are bought purely for speculation and are not lived in.

More for paid subscribers on China, the China region, Japan, Turkey, Israel, Britain, Panama, Peru, and Ireland on a Martin Luther King Day not celebrated here in London where I am.

Read more »

China Conundrum

Mon, 2014/01/20 - 7:41am | Your editor

Rumor has it that George Soros is shorting China. The multimillionaire first made a huBut there are skeptics apart from George Soros.

Euan Sterling, the head of investment at Standard Life, an insurance and fund management firm, this morning told the BBC that Chinese growth rate figures were unbelievable. He estimates that PRC growth in Q4 was “probably nearer 4% or 5%”, he told the newscaster.

Then too the Asian markets reacted very negatively to Chinese data and fell widely.

Other Chinese data today also created a sense of trouble coming. The non-bank money market credit system (shadow banking) doubled in size in 2013. This is removing Beijing's ability to control capital allocation toward the government's goals because huge waves of cash are going to where the return is higher. However, today's news that one fund sold by Industrial & Commercial Bank of China is going to miss its next dividend (right at the Chinese New Year) because of losses may wind up discouraging continued deposit rush to shadow banks. It is not defaulting, but merely missing a payment, according to its ICBC patron. But I expect huge withdrawals all the same. Will the money then go to another shadow bank in pursuit of higher interest, or into safer official savings accounts?

Another bad sign is China's continued real estate bubble. In 2013 home sales totaled the equivalent of $1.1 trillion, according to the latest figures. That is an indication of mis-allocation of capital because many of the homes are bought purely for speculation and are not lived in.

More for paid subscribers on China, the China region, Japan, Turkey, Israel, Britain, Panama, Peru, and Ireland on a Martin Luther King Day not celebrated here in London where I am.

Read more »

Dame Edna

Fri, 2014/01/17 - 6:43am | Your editor

This morning's Financial Times features a Dutch CEO (Gerrit Zalm of state-owned bailed-out ABN-Amro Bank) in a front-page photo cross-dressed as Dame Edna Everage, showing how humor has international sway. Dame Edna (AKA Barry Humphries) is a frumpy fake-posh Australian woman with a shaky upper class accent. The FT is firmly British and really grand. And the Dutch bank chief is also quite posh.

However the same newspaper informs us that 38% of UK voters over 60 support the UK Independence Party, far more than back any other party. That means trouble in the planned vote on continued British membership in an unreformed European Union. Old people turn out. They are upset about foreigners moving into their quaint villages and littering the lanes while laughing at jokes the old Brits don't understand.

What seems to bug the Little Englanders most is foreigners who cannot be spotted at 20 paces: Poles, Bulgarians, or Romanians. Having just employed a Bulgarian to repair my NYC kitchen cabinets, I a, astonished at this reaction.

Moreover, UK old folks seem less troubled by exotics from the Subcontinent or Africa who stick out. I'm not sure about how the English view Irish or Canadian or American foreigners because they are too polite to say anything to my face and I am not privy to what they say behind my back. As for Dame Edna, I'm sure they cringe at her gall and wouldn't let her into their cottages or hedgerows.

With their loony now at barely over 90 UC cents, I am not sure many Canadians (except for the head of the Bank of England) can make their way to the Mother Country at all.

More for paid subscribers follows from around the globe from The Netherlands to Hong Kong, from Britain to Canada, from Ireland to Singapore, from Israel to Thailand.

Read more »

Trees revised

Thu, 2014/01/16 - 3:16pm | Your editor

Blogs are made by fools like me/But only God can make a tree.

Back from the British Museum pre-Columbian gold exhibit from Colombia, I found my blog from this morning in need of editing. The page fought me because of a new JAVA download onto my computer overnight. I am not sure if it is a purely UK gremlin or a global one but I sure messed up my system. I have now removed it.

I also edited and cleaned up today's blog and added the newsletter tag stock symbols. Please visit the website at www.global-investing.com to read the corrected version if you are a paid subscriber. If you are a pre-sub what you got is unchanged. As the Brits say, frightfully sorry, old chap.

Read more »

Trees

Thu, 2014/01/16 - 9:08am | Your editor

It is Tu b'shvat today, the new year of the trees, a sort of Jewish Arbor Day. To paraphrase Joyce Kilmer, “I think that I shall never see a blog as lovely as a tree.”

Some nasty new software hit my computer overnight in London and I am struggling with it, so today's blog will be short as I hope to hit the Colombia pre-Columbian gold exhibit which I missed when we went to Colombia last year (we didn't go to Bogota where the gold museum lives.)

More for paid subscribers from Greece, Israel, Ireland, Spain, Canada, Colombia, Hong Kong, Britain. Mexico, Brazil, Singapore, and Finland.

Read more »

Better Than M&A

Wed, 2014/01/15 - 10:00am | Your editor

 

The wave of mergers and acquisitions is good news for investment bankers and for the executives who have guaranteed their own futures with, say, Jim Beam, from the acquirer. It is also good for their shareholders if the acquirer overpays (and they often do so.) But is this M&A wave  good news for the economy overall, and for jobs lower down the hierarchy? I think organic growth would be healthier.

And even better is when companies suing each other in court over soured deals or patents manage to negotiate a settlement which allows them to abandon the lawyers and just do business together again. The way is clear for growth when this happens.

And it did happen with two of our companies this week, discussed below along with news from North Korea, Mongolia, Myanmar, The Netherlands, Brazil, Colombia, Canada, Israel, India, Ireland, Finland, Africa, and elsewhere. Double issue today from wet but warm London.

Read more »

En Voyage

Mon, 2014/01/13 - 10:33am | Your editor

 

Your editor is off in a few hours for London and Paris. London is a usual destination, but Paris may be more significant. I am not thinking either of the "boss-napping" episode or the scandal over who is never-married Pres. François Hollande's current chosen mistress. I'm looking for a stringer ("pigiste") because my French contacts are getting stale. Details for paid subscribes below.

 

Only in New York. The Dessoff Choir, led by Christopher Shepard, with three professional singers, and a sing-along audience tackled parts of Johann Sebastian Bach's (ahem) "Prayer in B Minor." (Mass won't do for the version we sang, based on the Jewish liturgy.) The adaptation (or libretto) was by Dr. Eric Weitzner, who studied for the rabbinate before becoming a psychiatrist. The program cover shows JS Bach wearing a yarmulka and a tallith.

Some of the passages were easy, like using the Kadosh for the Sanctus or Sim Shalom for the Dona Nobis Pacem, since the texts are virtually identical.

Eric pushed things further with some of the more Christian (and non-Jewish) bits of Bach's theology. No agnus dei qui tollat peccati mundi; he used part of the Yom Kippur liturgy about forgiveness. No crucifixion or resurrection of Jesus made the cut; instead we had a reminder that Judaism also teaches the resurrection of the dead (by their Creator, God).

In place of the Spiritum Sanctum, (and pushing things) a text about how Moses was given the entire Torah including the later books and "this Torah shall not be changed, and there shall never be another Torah." This is from the Talmud which was reacting to the doctrine of the Trinity.

 

More for paid subscribers follows before I jet off from North Korea, France, Britain, Brazil, Canada, Spain, Israel, The Netherlands, and India.

Read more »