Sorry I Am Late

Sun, 2017/08/20 - 4:06pm | Your editor

My new desktop computer delivered Friday last night got updated by Windows 10 and the network diagnostics blue box has been running acorss the screen detecting problems for about 7 hours. Bill Gates' charitable giving is of course remarkable but it would be better still if Windows were not blocking my access to the Internet with Time Warner cable. I managed to get the laptop up and running at last but the new desktop is simply inoperable. Calling Dell (the alleged maker) resulted in a rude man telling me the defect was with my cable company--except I was able to get the older laptop to log on so I wasn't the cable connection. Now that I have managed to produce my tables in extremis I will start by calling the cable guys and then Microsoft, and then Dell. It is a great way to spend the day.

I did take a break for Chinese food at lunch with my husband. Now while I phone I am singing "l'assassin du dimanche" as Yves Montand used to do.


Boardroom Battles

Fri, 2017/08/18 - 12:29pm | Your editor

On the bus yesterday. I sat next to an African-American senior woman busily praying and crossing herself so I looked at what she was reading. It was a novena for Virgin and Martyr Saint Theresa Benedicta against racism and hatred. St. TB was the former Edith Stein, a German Jewish woman who converted to Catholicism and became the head of a convent. She was murdered in a concentration camp by the Nazis for being Jewish which doesn't make her a Catholic martyr in my view.

The reason I know this because Rabbi Cohen of the German Jewish reform synagogue where I was married, Temple Habonim, was a first cousin of Stein's. He warned us to make sure our kids had a Jewish background so they would have a place if they wanted religion in their lives as his cousin, who was Jewishly illiterate,had done.

As we wound up raising our family mostly in France where religious education is compulsory (the kids get off early every Wednesday for religious instruction and the default choice is Catholicism.) I am too tactful to have interrupte4d my praying neighbor on the bus.

So far this calendar year, there have been 6 changes of CEO at companies we cover and own. One was voluntary, a normal succession. One was ambiguous, because there were political elements in the switch we could not exactly determine. One resulted from a board losing its confidence in the CEO. And two were good old-fashioned battles between the company chief and the board carried out in public with maximum deleterious impact on the company share price. Both of the latter two episodes occurred at companies from India, where founder or oligarch chairmen got fed up with their own selected and often overpaid managers. One of these occurred today taking down a high-flyer stock by double digits as the two sides engaged in warfare via press release to try to get support from management, other board members, stockholders, and the public.

The share at issue today is Infosys, a tech company which is the second Indian multinational corporation hitting a strategy impasse this year, following that of Tata Motors earlier. We have sold both in good time without having had any particular insight into the factions that were fighting each other, mainly because the problems the companies faced were visible. TTM hit a wall trying to use the funds garnered by its global holdings like Jaguar-Landrover, to build out a mass market for cheap cars inside India. It is hard to build really cheap cars which have to be appealing to buyers and meet safety and exhaust standards while also making a profit.

INFY has to figure out how to deal with restrictions on its parachuted staffers coming in to the US with H1-B visas to do high-level technology adjustment on the cheap, taking the business away from their locally hired staffers who are paid US. There are similar problems also in other developed countries in Europe. Because of laxcorporate governance rules in the India private sector. large egos, and a receptive and virulent local press at the ready, you get to know when boards or the executive suite disagree.

The other companies which had boardroom battles are still in the portfolio and discussed below for subscribers.

The big news today from China was buried under the resignation of Vishal Sikka, Trump commentary, and the horrors on the Rambla and the beach in Catalonia. Under direct orders from Pres. Xi Jinping, China formally set new restrictions on overseas investment by private-sector Chinese companies. It banned so-called "irrational” asset acquisitions in industries ranging from real estate to hotels, sports and entertainment alongside sin businesses like gambling or the sex trade. Chinese companies were encouraged to invest alongside Beijing in the “one belt, one road” land and sea geopolitical expansion, what I like to think of as the “belt and suspenders” program.

More for paid subscribers follows: Pharma first.

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Initial Coin Offerings

Thu, 2017/08/17 - 1:56pm | Your editor

After Pres. Trump took credit for the good Wall Street performance earlier in his term of office, he may now have to take the blame for the downward move of US shares as a result of his break with our country's most prominent business leaders over how he discussed Nazism and racism after Saturday's events in Charlottesville, VA. But given his problems with criticism I doubt if he well recognize his own error. I think old statues are part of the landscape which doesn't mean they cannot cause distress or uplift.


Today I got a news release from Reuters about a new Initial Coin Offering, or ICO, one of a horde of new virtual currency offerings to hit the market this summer after Bitcoin hit new highs (admittedly during the week when two nuclear powers, the US and North Korea, were exchanging threats.) Bitcoins are how millenials deal with geo-political risk, replacing gold. The new offering is allegedly backed by venture capitalists from the Murdoch family, according to Rahul Soosuk, the CEO of a related company called Unikoin Gold whose assets are to be put into the new company. The release was later withdrawn from Reuters' site but not before it had been picked up by my brokerage.

Unikoin Sports Betting wanted to be the bookie for gamblers who want to punt without having to spend money on financing their bets using banks or credit cards—particularly in places where on-line bookies are illegal or limited, like the US.

I have also had a few readers ask me what ICO I recommend, so I am charging ahead today. I also got a UK promo from The Daily Reckoning whose publisher, Bill Bonner, funded the startup of this newsletter, offering a “FREE copy of a book by John Duncan, his cryptocurrency expert, called Make Money Crypto Currency Trading. This version is not available on Amazon or any bookstore.…”


Meanwhile there are crises as well in countries where markets are less than free, which also demand comment. So we will be talking about China and Colombia for a change. And drawing a lesson in stoicism from (of all places) Jordan.


China's plan to get private sector Hong Kong companies to buy shares of China Unicom, the state-controlled cellular telephone company listed on the Big Board as CHU, has been derailed because it apparently violated Hong Kong stock exchange rules. While civil rights and citizen protection in the former Crown Colony no longer apply when Beijing wants to crack down on dissidents or currency violators, stock market rules have to be respected.

The plan announced this week was to raise $11.7 bn with the issue of new CHU shares. I worried that one of our top performing shares was expected to become the second or third largest non-government company in the new CHU roster, along side other internet stars. The lead investors were to be an insurance firm, China Life and railroad CRRC. The company we own was due to own 5.2% of Unicom and it was unclear if this was to be a passive investment or lead to new linkages between telephone operating companies and the content and social media operations of high-flying private sector firms.

In the conference call earlier this week, its president answered a Deutsche Bank analyst about the plan for it to buy into Unicom blithely: “I think mixed ownership is actually a direction for the government to embrace more market governance for state owned enterprise. So, I think that has no implication on more regulatory pressure on our business. In a way it’s actually the other direction. It’s hoping that the market force can help state owned enterprise to be more competitive. “ Today he might have second thoughts.

The question has not been answered because Hong Kong suspended Unicom trading today. Trading the local Shanghai shares on which the US American Depositary Receipts are based, had already been halted in April and, not too surprisingly, the ADR stock crashed. Unicom has now withdrawn the capitalization plan temporarily for "technical reasons" but said it will file a new plan next week. More on what this means for our portfolio is covered only for paid subscribers.

Meanwhile a politically well-connected CEO of a Colombian firm has resigned for “family reasons” a few days after he presented what looked like good results for the ADR in English in a conference call I reported on. This too is presented below along with what happened to the ADR. And we revisit a former holding from Jordan to understand how markets work. And the usual suspects from around the world from Alsace to Hong Kong, and from Switzerland to Ireland, and from Sweden to Russia.

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Civil War Statues and Heroes

Wed, 2017/08/16 - 1:23pm | Your editor

Forty years ago today Elvis Presley died at age 42. You may mourn him however you wish, unless you are one of those who think he is still alive. I am totally neutral about which side of this pseudo-controversy is right.

But I am not agnostic about President Trump's continued attempt to link rhetorical excesses by some wanting to remove the Charlottesville memorial to Robert E. Lee to the Nazism, racism, and murder from the right-wing demonstrators. Lee, who did not own slaves, would disown these supposed supporters of the gallant South.

Jefferson, who founded the University of Virginia in Charlottesville, owned slaves. He practiced miscegenation with 'Dusky' Sally Hemings, a violation of Ku Kluxer rules.

This country has better things to worry about than statues, including the gold-plated equestrian one to a general on Fifth Avenue here in NYC about 5 blocks north of Trump Tower and visible from some of the apartments in the former Plaza Hotel. (The magnate put its name on a newer 'fake' building after his former wife Ivana sold the real Plaza as apartments.)

The gilded statue is of William Tecumseh Sherman, who 'won' the Civil War for the north, by extreme destruction on his 'March to the Sea'. I put in the quotation marks over his exploits because Sherman famously said later: “War is hell!”, referring to civil war.

Our President needs to abandon his fascist, Blackshirt, Gauleiter, Hitler Jugend, and other Alt-right supporters. The South had to defend slavery on which its economy depended. It and and Lee took the wrong side. But they were honorable when compared to Sherman, Bannon, or Trump.

UnAmerican Nazis are not the Confederacy's noble heirs. Some of Sally Hemings' offspring are Jefferson's only living descendants.


More for paid subscribers follows along with two quarterly reports and news from Germany, Hong Kong, Canada, Israel, Ireland, India, Britain, Brazil, South Korea, South Africa, Spain, and China.

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East Side, West Side and Yields

Tue, 2017/08/15 - 1:11pm | Your editor

Today I am writing up another way to tackle our desire for a floating rate instrument as interest rates may rise globally. So to try to get the news to my paid subscribers quickly, I am truncating my usual macro-economic commentary. Pres. Trump is back in my city and the streets around his tower are blocked against demonstrators by garbage trucks parked tightly to stop access to the place. East Side, West Side, all around the town, he is not popular in his home city—except for Staten Island which may have switched sides since the poll.

More for paid subscribers follows from Britain, Ireland, Israel, Spain, Ireland, Denmark, Colombia, Sweden, Australia and Canada.

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What We Don't Buy, sent again

Mon, 2017/08/14 - 2:16pm | Your editor


Oh What A Lovely War has been postponed. It means that American diplomacy and democracy need to be improved by the Trump Administration after the futile—or dangerous—threats against North Korea. Wall Street is up with a sigh of relief but the real market rise will move away from that bubbling cauldron to other lands, mostly in Asia.

To start with Japan chalked up an exceptional and world-beating 4% annualized growth rate in the June quarter despite the high yen exchange rate which was supposed to hold it back. My theory is that the country's long-lived aging population is fed up with low returns on savings and is spending more freely, perhaps for the good of the grandchildren.

China is diplomatically in clover as North Korea and Trump trade threats and insults. Economically it is probably not doing as well as Japan, or even South Korea. More on this for the paying subs below,

And in Washington DC, after the president produced a feeble attack on all sides over the Charlottesburg murder, his chief right-wing aide, Steve Bannon, of Breitbart, is reportedly on the skids.

Meanwhile the ominously named Pres. Lenin Morales is seeking to get into the hot market of brine-extracted lithium. Lenin M. designated four pilot sites and hired a German PR firm to bring investors into Bolivian brine. I think he needs to change his name.


For the first time in weeks there is only one company in our portfolio reporting today, so you get a special report on two stocks we examined and will not be buying and one we bought in error and have to sell.


*Eco-invest's Max Deml tipped a photo-voltaic specialist company from South Korea, Shinsung E&G Co. and he has added it to his photo-voltaic 30-stock index. Shinsung's ENG was founded in 1972 to build clean-rooms for electronic companies and was listed in Seoul starting in 1996. It began to diversify into solar crystal cells and spun out the E&G arm and ENG plus a joint holding company in 2008. In 2016 the group reacquired its 3 entities under Shinsung Solar Energy label and bought out holders of the other listed entities. It then renamed new parent Shinsung E&G early this year. It trades as KR7011930005.

There are no ADRs yet and no foreign listing, as South Korean rules on going global are very strict.

Shinsung E&G has its HQ in Seongnam near Seoul and factories there and has subs in the USA, Japan, Singapore, Malaysia, and Hungary (not far from where Max hangs out). CEO Lee Wan-Keun plans to offer more solar energy products beside cells and modules, like solar power stations.

Last year turnover at Shinsung rose 27% to KW 217 bn, about $165 mn and EPS soared 535 to 36.54 won/sh. Max recommends the stock at 2130 won saying its market cap is only 1.8x its annual sales level but warns that its p/e ratio is near 50.

We are passing on this idea until Shinsung creates an ADR because there is no way we can buy in Seoul. I was keen to find a bargain there after the near nuclear showdown last week but this ain't it.


*The U shares of Royal Bank of Scotland were not among those which RBS announced plans to redeem with its H1 report, saying it was not cost effective. RMS will not be able to redeem its U shares until 2027 under the prospectus, so I looked into them as a possible home for oursoon redeemable RBS high-yielding non-cumulative preferred: the L and the F shares from the parent, and the C shares from Nat West, now a sub.

There are many reasons NOT to buy the U shares which bear variable interest based on the Libor rate (London Interbank Offer Rate). It is being abolished within 5 years because of manipulation by the banks which deal in this benchmark, formerly used to set interest rates for some mortgages in the USA and and Europe. That means there will be no benchmark at all from 2022 to 2027 and the carry rate of 5.14% will be the maximum payable.

The other reason for not buying the U shares is that the minimum purchase is 10 shares with a face value of $10,000, meaning an investment of $100,000 (give or take a few grand depending on how the market feels right now.) It is only for institutional buyers and therefore doesn't belong here.

If any of you are qualified to buy its dusip is 780097AU and it bears variable interest at 2.32% over the 3-mo Libor rate, along with the carry rate of 5.14%. The share was recommended last week by Renaissance Research on, a website addressing retail investors, and was made an editor's choice.


*I am being cautious after finding that there was no US brokerage custodian who would accept the Blackrock-managed Canadian dollar denominated XFR in Toronto, the Blackrock C$ Floating Rate Note iShares ETF I researched it in Morningstar. It turns out that it was not supposed to have been bought by a US person. Under St Ronald Reagan the US passed a law against passive foreign investment funds or PFICs which apparently XFR can (maybe) be classified as. So the brokers don't want to hold it. And I was never supposed to have been allowed to buy it except the Fidelity brokers were very keen to get brownie points for booking the expensive trade (which involved currency conversion fees and high Toronto commissions).


More for paid subscribers from Hong Kong, Canada, Australia, Germany, Brazil, Israel, Spain, Panama, and Guinea.

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Sunday Table Revelations

Sun, 2017/08/13 - 11:37am | Your editor

I have just posted our Sunday tables with difficulty, because some foreign stock American Depositary Receipts traded on the pink sheets, OTC, on the gray market, do not show up in Schwab's account tables as they do at other brokerages. For consistency's sake I am using the US$ trades for these rather than posting results in sterling, Hong Kong dollars, Euros, or Norwegian kroner, but I may switch over to local currency non-ADR prices if I cannot get what I am used to from my new broker. I am still learning the process. I am not sure if Schwab does better than Fidelity in updating foreign quotes as a reader with hefty Hong Kong positions complained to me

I moved these to local exchanges mainly to avoid the huge commission if I trade them here, $44.95 for any trade of a share ending in F (except those in C$S which trade at US rates). I may have to move these exotics into my US account until I am ready to trade them to get current prices.

The main lesson of the past week is that war fears are not particularly dangerous for stocks in countries like South Korea or Japan--the expected target of North Korea which is being goaded by our president. They are down but so are almost all other shares in the US or anywhere else. The only exceptions are shares in some special situation, like one issued with exercisable rights to buy new shares. And gold of course, the bolt hole of choice when there is geopolitical uncertainty. I only wish that Pres. Trump would stop echoing his North Korean and Venezuelan opposite numbers, because either he will lead us to war, or more likely, he will lose credibility if he doesn't follow through.

Either outcome is bad for US shares but, in my admittedly biased opinion, less damaging for the global investing strategy which I preach.

More follows for paid subscribers:

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Vacation issues

Fri, 2017/08/11 - 1:38pm | Your editor

As a result of August when people go on holiday and the fact that my contractor-webmaster is starting a new full-time gig next month, I am not sure that the problems with delivery which hit Thursday's issue have been resolved. So I would be grateful if readers would just visit to view the Friday edition because the emails may not be going out from the webhost.

thanks for your understanding, the technically challenged editor

Guns of August

Fri, 2017/08/11 - 1:33pm | Your editor

Instead of internet investors China has unleashed internet investigators in a crackdown on social media sites which are violating its cyber laws. This is to keep Chinese netizens behind the Great Wall to block any access to subversive content not in compliance with communism or the ambitions of the current leadership. Beijing is deliberately hiding its real crackdown on ideas by claiming that websites are addictive or allow financial fiddles. China's internet overseers charged chat-rooms with “spreading violence, terror, false rumors, pornography and other threats to national security, public safety, and the social order”. Public safety is a buzz word for me.

The chat-room crackdown's real purpose is to block ideas which question the official government line. It also protects from exposure the corruption by relatives of present and past top leaders, including Pres. Xi Jinping the ruler over the regulator. Robespierre during the bloodiest days of the French Revolution also claimed his Jacobins were operating a “committee for public safety” which ultimately guillotined political opponents who dared to publish criticisms of the terror.

Later this year Xi wants to consolidate his power at the 19th Communist Party Conference, so he wants to get potentially subversive opposition chat off the 'net. Cyber security is a cover-up for thought control. The targeted websites, WeChat, Weibu, and Tieba are run by private sector groups like Baidu (BIDU) or Sina or Tencent (TZTCF).

More on what this means for our portfolio is explained below for paid subscribers. We have news from Hong Kong, South Africa, Canada, Bermuda, Germany, Brazil, Canada, Israel, Ireland, California, Australia, Finland, Mexico, and Britain. And even a couple of company reports and updates on them.

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Brokerage Problems, Thursday resend

Thu, 2017/08/10 - 5:37pm | Your editor

I have finally extricated myself from the clutches of Fidelity which will send the proceeds from the forced sale of my holding in iShares Floating Rate C$ ETF, XFR-Toronto, to my new Schwab account. I will cease coverage of this holding as it is not legal for US folks to own it without filing an onerous Passive Foreign Investment Company report. It was because of this that I could not transfer my holding to any brokerage account and while Fidelity offered to issue me with a share certificate for a mere $100 it would not have avoided the PFIC issue.

My readers told me about other issues with this brokerage. One who had been with Fidelity for ages found that he was being denied the ability to pick which stocks were being sold to minimize taxes. All trades were being done first-in-first out (to avoid short-term gains or losses, in theory better for taxpayers). For capital gains tax reasons however, he wanted sometimes to have the trades done last-in-first-out but could not get the brokerage to do this.

A sophisticated investor who holds Hong Kong shares in a Fidelity account found that the daily prices from when Hong Kong is open did not port to his account after the close, so he could not value his portfolio during normal US waking hours, in the same time zone as I am in. I advised both readers to write to Abigail Johnson who heads the firm. If any other paid subscriber needs to do this I will provide her email and snail mail address, which I have because the company used to subscribe to my newsletter


Meanwhile my own global investing account while in existence does not yet show my non-Canadian F share positions, so I also have problems spotting what I have to look into during my waking hours. This Schwab move also creates a problem with a stock I watch closely discussed below.


Today beside the XFR matter I had to cover lots of news so the blog is late.


More for paid subscribers follows from Brazil, Canada, Israel, Mexico, South Africa,India, South Africa, Belgium, Denmark, and Australia including the usual Thursday overload of  quarterly reports.

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