Big Deals and Blockbuster Developments
The Wall Street Journal took time off from its vendetta against Hillary Clinton and those who worked for her during her tenure as Secy of State (including our once and future reporter Amb. Harry Geisel) to report that Turkcell Iletisim Hizmetleri AS had finally held its first shareholder meeting in 4 years after the telco was threatened with nationalization by Turkish regulators. This forced its trio of battling owners cooperate temporarily and defer fighting to control of Turkey's leading mobile phone company.
The trio of owners are: Cukurova Holding AS, the local player; Alfa Group, run by Russian oligarch Mikhail Fridman; and TeliaSonera AB of Sweden.
They managed to approve paying retroactive dividends to shareholders totaling 3.9 bn Turkish lira (~$1.5 bn) for the 2010-4 fiscal years. This amounts to 42.5% of TKC profits during that period.
The Journal wrote: "After nearly a decade of legal battles and boardroom maneuvers that crippled decision-making at Turkcell, [the 3 leading owners] struck a rare compromise, providing a boon to investors but doing little to end their ownership struggle. If they had failed to convene the general assembly, Turkish regulators at the Capital Markets Board would have been able to seize power in the name of all shareholders, with the majority owners effectively relinquishing their authority and ability to set the dividend."
There may be a lesson here for the US Congress and those trying to undermine Foggy Bottom.
While co-generation is normally a good way to save energy, by channeling heat from creating electricity to nearby residences, Con Edison plants along the East River in Manhattan have been turned off preventively after the huge fire yesterday on Second Avenue. As a result, residents of posh Sutton Place like me, at an unimaginable distance socially from the East Village, lack heat and hot water today. I am not sure I dare use my electric heater after last weekend's Brooklyn fire.
News for paid subscribers follows from Ethiopia, Canada, Israel, Ireland, Brazil, Denmark, Spain, India, Belgium, and Finland including major deals.
Thanks to good omens we bought and sold Japanese small caps today. The sale was of Daihatsu Motors, mini-cap maker of mini-vehicles, after Chris Loew, our Japanese correspondent turned sour on the shares of DHTMF because of poor sales. We sold at $15.24 right before the close.
More on our buy for paid subscribers only follows.
Today's Heinz-Kraft deal recalls family lore. My unmarried German-born future mother sailed for the USA in 1937 with a full dowry of silver and dishes for a future Jewish bride: milk, meat, and neutral service for 12 in year-round and Passover versions plus a lifetime's worth of bed and table linen and nightgowns. At that time the Nazis allowed this stockpiling but would not let German Jews take out money.
The silver stash was stolen from my newly-wed parents' apartment on Nov. 9, 1938. They were upset but more so over the news from Germany after they reported their loss to the cops. It was Kristallnacht, the night of broken glass, when the Nazis began the first destruction of synagogues, and Jewish schools and community buildings, along with arrests and imprisonment in concentration camps of German-Jewish leaders.
Mom's “dot” also included bearer shares her late grandmother Dinah had received from her brother in America. I am unsure what her great-uncle's name was (she told me but I forgot.) The shares were in a coffee company called Maxwell House.
When she got to America, my mother turned them in for General Foods stock, as there had been a merger. During my childhood, shareholders (like Mom) got big boxes of General Foods products each year as a bonus dividend. Being kosher, Mom would not eat some of the goodies, so she traded with our Marchetti and Caruso neighbors.
Kraft, successor Mom's General Foods, which she sold at some point, was crafted by multiple mergers with other purveyors of branded food. So I am a co-descendent of a founding stock market craftsman, alongside the Buffett and Lemann clans.
Every time you eat some unwholesome sugar- and salt-laden all-American pseudo-food, thank my triple-great uncle, and my double-great grandma Dina. I'm glad that shareholders and deal-makers no longer get “care” packages from their companies as I want to keep Warren Buffett around longer.
Today the price of gold, oil, and other commodities rose because of the Saudi attack on the Yemini Houthis, amng many Middle East developments.
More for paid subscribers follows today from Britain, The Netherlands, Switzerland, Colombia, Hong Kong, Japan, Germany, Brazil, and Portugal, including stock advice. Read more »
Dr SF wrote:
Don't know if I am getting a touch of senility or what, but the posts on many of the G-I holdings seem ever more inscrutable to me. Terms such as shelf prospectus, banker's acceptance rate, ICE gold fixing pool, are unknown to me. If most of your subscribers understand this lingo, then fine, include it. Otherwise, could you consider explaining the news and its relevance in simpler terms? Thank you.
Dr F, Sorry. I was in a rush. As I wrote for The Banker in London for years this terminology comes too easily to me.
I was writing about a Canadian dollar issue. Canada uses a different base rate for floating rate debentures, not the Fed funds rate but the bankers' acceptance rate. Both are indicators of the average price of money. Read more »
Swiss Banking Rules
To go to the Israeli index confab at the Harmonie Club today, I am keeping this letter short. But I cannot resist a Swiss banking story.
Conflict of laws is alive and well according to Neue Zuercher Zeitung today. A Swiss commercial court last month ruled illegal Credit Suisse's freezing the accounts of a US millionaire with the marvelous name of Millard (near the French and German for billion).
CS will have to pay computer pioneer William H. Millard back and also compensate him for blocking his access to his money from autumn 2011 to end 2014. The Millard couple lives in Grand Cayman and their account with a CS sub, Clariden Leu, was frozen in response to a US tax accord with the Northern Marianas, a former colony where the Millards had lived.
Bill Millard invented the first desktop computer (the Imsai 8080) and founded Computerland stores which he sold to become a member of the Forbes rich list. Then the Millard couple became citizens of Saipan to avoid the prohibitively high tax rates of the 1980s. But then they spearheaded an attempt to cut corruption in the Marianas by the FBI. So they got tax bills from their supposed tax haven. They left in 1990 and moved to the Cayman Islands.
In 2011 they were fighting a New York law case over a Mariana tax bill from 1994, boosted by penalties and interest to $118 mn. Bill Millard argued they had already settled the island's claim before moving out.
Under banking secrecy rules the Millards were not given much information on the Swiss banking moves in 2011. Their account was frozen despite Swiss rules allowing accounts to be frozen solely for money laundering or criminal operations, neither of which was at issue.
After the Clariden Leu Swiss bank accepted the Marianas Islands' claim the Milliards initially paid another $1.4 mn from their Swiss account. Then CS, the parent bank, billed them for another $250 mn in legal fees and froze the account.
The Zurich commercial court ruled that these legal fees were incurred by CS for its own interest in operating in the USA. After a scandal about US tax evaders, CS had agreed to cooperate with US tax authorities over Americans who had hidden accounts. The Millard account was not hidden; it was used to pay the extra $1.4 mn claim to the Marianas.
Yet the link between the parent and the sub turned out to be a key. A US Federal Court had concurred in a May 2013 case over a sub of Canadian Imperial Bank of Commerce operating in the Cayman Islands. So CS sub Clariden Leu also was not covered by the deal between CS and the Feds.
More for paid subscribers below including a possible future Japan stock idea from Chris Loew and other news from Denmark, Britain, Ireland, Japan, Chile, and Canada:
Sabbath Observance Tech
After the tragic fire in Brooklyn, a product suggestion for Israel's elite tech innovators. Find a mechanism for Orthodox Jews to keep food hot without putting their lives at risk of fire. This should be a relatively easy thing for the renowned tech whizzes of the Israeli Defense Forces to figure out, creating a start-up that might bridge the country's political gap and make money.
Sabbath observance in the Diaspora is hard because of how cold it is in the lands of exile compared to Biblical Israel. So you need a work-round of the rules to have heat, hot water, light, and hot food despite the ban on kindling fire.
Many solutions exist: the Eastern European “Shabbos goy” who came into the Jewish house silently to light the fires; a charcoal brazier with the “cholent” gently heating on the back porch; a “blech” covering an apartment's slow stove burner keeping food hot, once made of asbestos (oy!) but later of tin; the special Sabbath setting on ovens made for the Orthodox. Read more »
The tables at www.global-investing.com have been updated and may be viewed on the site. Everyone can see the closed positions table but only paid subscribers get to see our current positions and advice. To view the spreadsheets more easily, use the "printer friendly" button even if you don't want to print.
The webmaster is off on a much needed spring break and I am filling in for him, so I hope there will be no tech issues coming.
The big news from the tables is that we gained much money last week mainly because of the rise of foreign currencies against the dollar. Since our portfolio is in non-US stocks and bonds (either directly or through closed-end or exchange-traded funds), everything went up unless there was a problem at a company. This is my main objection to the recent spate of exchange-traded funds combining foreign positions with short sales against the dollar. The shifts can be rapid as the FX market is about 10 times as large as the total global stock and bond markets and if you don't mind my mixed metaphor, it can turn on a dime.
That is also why we do not use stop loss orders in our foreign holdings. There can be sudden moves either over currency changes or because the US marketmaker is worried about exposure (on Fridays, for example). So using stop loss orders risks forcing a sale over a brief price move we do not need to follow.
TWe also suggest always buying in Europe during the morning, and only trading on the Pacific Rim from Sunday to Thursday. That is based on being in New York like me. If you live in Hong Kong or Australia, Brazil or Argentina, you have a different schedule.
More for paid subscribers: Read more »
A New Stock Idea
Too many mixed forecasts is not only the result of ambiguity by everyone from PM Benjamin Netanyahu (now walking back from his no-two-state remarks at the end of the Israeli election campaign to Janet Yellen at the Fed saying patience was ended but unemployment might delay higher interest rates this summer.
Israel Chemicals is thinking of buying Soquimich, the Chilean potash firm whose share price collapsed after its Pinochet-era insiders tried one too many tricks, using profits hidden from the taxman to try to buy an election. ISCHF which has problems with the environment and unions at its Dead Sea Works and SQM are both members of the legal global potash cartel run by Potash of Saskatchewan whose exit from the SQM board precipitated the krach in the stock.
Meanwhile today is the beginning of spring and snow is forecast for much of the northeast USA. And Europe was treated to a solar eclipse and a harvest moon.
What does it all mean? For whatever it is worth the dollar, after falling midweek and recovering yesterday is back in the down column. Oil and gold, meanwhile, are up. Gold pricing by the newest most transparent fixing in London (now by the ICE, the International Commodity Exchange, not a pool of bankers), inched up, partly because it is priced in dollars.
More for what this means for paid subscribers including a new stock pick follows from Canada, Britain, Switzerland, Israel, Australia, Colombia, Netherlands, Spain, Germany, and Ireland.
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Taking the Euro Out of Europe
To run the Fed well, like a “maestra”, you need to speak ambiguously, as Janet Yellen did yesterday. While the awaited drop of the word “patient” from the US CB statement about when rates would rise drew initial market attention—boosting US stocks and hurting the dollar—a closer reading revealed the importance of the other Fed mandate: jobs. As predicted by banking adviser-neighbor Geoffrey, what the Fed really was saying that it might delay higher interest rates.
Today saw reversal of the dollar drop. This among other things warns against currency-hedged funds investing overseas. To “take the euro out of European stocks” as one exchange-traded fund promises, is not simple. Our currency hedges use specialized funds rather than a mash-up by stock-pickers with amateur foreign exchange moves.
I continue seeking a lawyer to help us get compensation for a portfolio pick, Portugal's only NYSE-listed American Depositary Receipt (ADR) stock. After a large local bank failed and was taken over by the Lisbon government, our Portugal Telecom lost nearly $1 bn of its capital, which disappeared in the bankruptcy of a Luxembourg holding company belonging to Banco Espirito Santo, now truly a ghost.
Luxembourg is the European Union's original tax haven, where Belgian dentists placed their money. We need a Lisbon securities lawyer in our quest. Class action suits do not exist in Portugal.
The issue is not without wider European import. Other banks failing right and left also involve cross-border entities within the European Union. Banco de Madrid in Spain failed over fines imposed over shenanigans by its Andorra sub. (Andorra, in the Pyrenees between France and Spain, is a tiny sovereign entity specializing in tax evasion.)
Public and private German banks are fighting a moratorium on interest and repayments granted by Vienna to clients of a failed Austrian regional bank, Hypo Alpe Adria, linked to the late Carinthian right-wing demagogue Joerg Haider. He died 7 years ago.
Among those not being repaid for loans by HAA are Bayern Landesbank (a state-owned mortgage bank controlled by Bavaria), and Commerzbank, a German market-listed bank with an ADR. While not usually considered an egregious tax haven, Austria historically helped clients from its neighborhood (east and west) shelter assets thanks to banking secrecy.
While both recent bank failures are much smaller than BES's, it creates bad precedents. Here is a good one. Switzerland, under a new policy of cracking down on fraud, has frozen ~$400 mn in Swiss bank accounts suspected of containing the proceeds of payments to politicians by Petrobras. Moreover, the Swiss returned $90 mn of their contents to Brasilia already and will soon add another $120 mn, according to Neue Zuercher Zeitung today. The repatriation was announced in a press conference by Swiss Attorney-General Michael Lauber with the Brazilian one, Rodrigo Janot.
There is a family precedent for PM Benjamin Netanyahu's racist attack on Israeli Arab citizens for voting in the recent election for a new unified Arab party. Racism is a family trait. Prof Benzion Netanyahu, the 3-term Premier's father, made his academic spurs by studies attempting to prove that hidden Jews in Spain, Portugal, and the New World were not Jewish. The Inquisition charges against judaicizer “Marranos” or false conversos, the senior Netanyahu argued, were motivated by pure greed for their assets. The Marranos, he wrote, had abandoned Judaism and could to be considered Jews.
Benzion tried to reverse the modern rabbinical recognition of Jewishness among so-called Anusim or conversos living in the US southwest and Latin America, many of mixed race. The persistence of Jewish practices like not eating pork and shellfish or lighting candles on Friday night or sitting on low stools to mourn their dead, Prof Netanyahu claimed, were mere folklore, not indicators of Jewish religion or ancestry. He opposed the stance of modern mainstream Judaism.
There are no racial objections to the “re-found” crypto-Jews of the Portuguese hill country in Belmonte and other villages around Bragança and the Portuguese ski resort of Guarda, in Tras-as-Montes. They are genetically closer to other Jews than to other Portuguese. The same is not true of crypto-Jews in Arizona, Bolivia, or Florida like Lois, a Jewish lady with a Florida Seminole Indian great-grandmother, moreover on her mother's maternal side, the one which counts. She is a Reform Jew, having no choice.
Benzion Netanyahu's writings would deny her and others the right to return to their ancestral religion without a conversion ceremony because only some of their ancestors were Jewish and were under Inquisition attack for wealth rather than heresy.
More about Latin American Jews and other news from our companies follows from Britain, Hong Kong, Mexico, Venezuela, Portugal, Chile, Spain, Canada, Singapore, and Israel. Much about restructuring and corruption and rumors.