Trumping Trump's Ego
In today's Financial Times, Joachim Fest, an economic advisor at Pimco (a stock we indirectly own) wrote:
“In any large economy is in need of being made great again, it is Europe's. Following a decent economic performance between the creation of the single currency and the global financial crisis, Europe has been stumbling through a lost decade.
“Economic growth in the EU has stagnated since 2008 and the unemployment rate remains twice as high as in the US. As a consequence of the euro crisis, the banking secotr is Balkanized and the financial market sare fragmented. The move towards 'ever deeper union' has stalled; separtism and a new nationalism are on the rise. Brexit appears to be a teste of things to come...
“Ironically, Mr Trump's promise to put American first might help make Europe great again. While the new US administration aims to discourage imports and boost domestic production, European exportersshould still be able to increase their market share in the US for some time.
“One reason is that the dollar has strengthened and the euro weakened since the election... Greater consumer and business confidence and higher stock prices could boost US demand for goods produced domestically or abrod.
“The prospect of a more protectionist US administration—together with existing local pressures from populist movements—will probably provoke policy responses in Europe aimed at simulating doemstic demand and potential growth.
The chances are than in four or eight years' time more Europeans than Americans will have reasons to say 'Thank you, Mr President.' ”
Today your editor is trumping Trump's egotism. I got noticed by two investment publications, that same FT of London and the Jan. 27. issue of Investor's Digest of Canada. The FT printed on its editorial page a letter I wrote:
“Sir, Your book review of Nancy Weiss Malkiel's “Keep the Damned Women Out:”: The Struggle for Coeducation (January 23) descirbes her as an emiritus professor at Princeton. Surely she is better described as an emerita professo, since she is a woman who rose to that rank despite the antagonism towards women in US (and to a lesser extent British) universities until recently. To have overcome the prejudice she had to have more merit than a mere male doing a random walk in the Ivy League.
“New York NY, US..”
The Canadians quoted a note about a stock pick made by me a year earlier:
“Wall Street's Best Daily newsletter (from the publishers of one of our featured advisories, Cabot Benjamin Graham Value Investor) recently celebrated that 'the 2016 markets were terrific. The Dow, the S&P 500, and the Nasdaq all made double-digit returns. But our contributors blew the doors off with their “2016 Top Picks!”
“Among the top five winning contributors was none other than Global Investing's Vivian Lewis, whose recommendation of Canadian energy infrastructure firm Veresen Inc.(VSN-TSX, C$12.89) gained 83.6%.
“Veresen's successful 2016 is all the more remarkable, says Ms. Lewis, as it occurred in the same year as the U.S. Federal Energy Regulatory Commission denied permits for VSN's gas liquefaction plant a Jordan Cove, Oregon—a planned facility for shipping gas to South American and Asian Pacific buyers.”
We own Pimco, a San Diego fund manager specializing in bonds, through its German parent, Allianz Versicherung. Today we publish an update on Veresen under the new US Administration. It trades in US$s as FCGYF. We also have news from Britain, Israel, Mexico, Canada, Chile, Argentina, Brazil, Ireland, and the Nordic countries, Sweden, Finland, Denmark, and Norway, plus a half-yearly report and three (3!) new buys.
As January Goes, the Year Doesn't
At last the stock market stopped teasing about the Dow-Jones Industrial Average going over 20,000. But if you remember what happened in 2016 you will realize that January doesn't set a trend for the whole year—either downward as then, or upward as now.
With the new Adminstration just beginning to get its act together, and Pres. Trump still worrying about how popular he really is, there are grounds for worry.
China remains a key concern both economically and militarily as the country more or less shuts down for the New Year of the Rooster.
Russia is its enigmatic self and Washington is deeply split on how to handle Putin.
Britain will be first up for coordination but unfortunately its political progess toward exiting the European Union is uncertain.
Then there is Mexico against which candidate Trump promised Armageddon to allegedly save American jobs. For me, how the talks with Peña Neto go will be a major determinant of just what Trump's reign will involve. I have my fingers crossed that there will be sensible changes to the NAFTA treaty rather than a trade war. That treaty accounts for about a third of US trade, double what we do with China.
However, until the White House stops the tweeting and misstatements, I worry about exactly how we will be governed. Given the displomatic unknowns—not even mentioning the Supreme Court or Obamacare or global warming—it is far too soon to write that as January goes so goes the year.
A big accounting scandal and a couple of little ones hit European stocks today, one reason the DJIA rose. BT, formerly British Telecom, issued a serious profits warning because of fiddling with the books at its Italian unit. Swiss Novartis was accused by the US Securities and Exchange Commission of using bribery to sell its drugs in Greece, the second DJ-listed drug major in trouble with how it garnered sales.
A US-listing is popular with global companies, but it opens the door to enforcement of accounting rules. Ultimately, this is good for markets because stockholders need to be able to believe corporate reports are complete and honest
More for paid subscribers from Russia, Spain, India, Mexico, Argentina, Australia, Germany, Italy, Canada, Britain, Ireland, Pakistan, Israel, Cuba, Chile, and the Dutch Antilles.
Russia vs Merkel, US vs Canada and Mexico
DPA, a German press agency, reports today that a Brussels European Union Working Group concluded that the leading Kremlin disinformation target is German Chancellor Angela Merkel. This is because she is holding out for sanctions against Russia over the eastern Ukraine and Yalta snatch. She is the European leader about whom the most false news is promoted in Russian media, claiming she was complicit in the murderous Islamist attacks on Berlin, Brussels, and Paris.
This anti-Merkel “Big Lie” was promoted in 2500 misinformation notes traced to Russian sources since Sept. 2015.
Our new US president's persistent false-news statements, like his nonsensical claim that 3 to 5 million illegal non-American voters accounted for Hillary Clinton's popular vote majority, is of a piece with the Putin attacks on the legitimacy of the Berlin government. Raising questions about the US or German electoral process helps Russia support its government of corrupt and murderous KGB agents.
As a journalist, I urge writers both on-line and in print to fight US misinformation by exposing liars who form the worst Washington swamp of all. Pres. Trump needs to listen to our CIA and realize that Putin is not our potential pal.Islamist and Russian violence is a legitimate reason for working with Germany and Nato countries. He must be held to the standards of truth of a free press, and not allowed to tweet or state falsehoods.
We have news today from Canada, Mexico, Pakistan, Britain, Germany, Finland, Israel, Australia, Brazil, Colombia, Hong Kong, and South Africa. We also have some buys and sells.
First Market Day for Trump Administration
Beware of Greeks bearing gifts. Gorgeous George is in trouble with the Securities & Exchange Commission. According to CNAFinance.com, the CEO of Dryships, George Economou, lied to the SEC in multiple 6-k filings. It is alleged he did so using a Panama Papers proxy he owned and via corrupt Canadian officials. There also seems to have been a British Virgin Islands entity callled Kalani which refinanced the firm. Then it used the money to buy 4 Very Large Gas Carriers from Economou. There is an ongoing SEC investigation.
We bought the DRYS shares after the successful ipo in 2005 by Cantor Fitzgerald and sold when the price of iron ore started to fall. We bought despite Economou, an MIT graduate, already having filed for chapter 11 in 1999-- after all our future President also claimed bankruptcy at the time.
This is one where your editor intelligently opted to fold rather than hold. Back in Nov. when there was a short squeeze I warned you all publicly not to buy the soaring shares which went to triple digits. The shipping company run by a Greek but incorporated in the Marshall Islands, runs dry bulk carriers, of which the world has a surplus.
Trump's restrictions on trade will further hurt this sector.
The market is still trying to figure out what our new president, with the short hands and the short attention span, will mean for the dollar, stocks and bonds, and the US economy. Being of the same generation I know how hard it is to teach an old dog new tricks beyond tweeting that is.
Today is the first full market day of the Trump presidency and things do not look particularly good. He held a chat with business leaders and promised to remove 75% of regulations—which many of them probably have learned to live with. I think it would help if Mr. Trump were required to write a blog with real rather than alternative news.
More for paid subscribers follows including another Trump Administration stock pick. We have news from Britain, Germany, Italy, Dutch Antilles, Mexico, Brazil, Colombia, Panama, Chile, Argentina, Australia, Hong Kong, South Africa, and Israel.
I have just posted my tables for subscribers and pre-subscribers showing our latest positions and trades. To view the ones you are allowed to see please visit www.global-investing.com and sign in using your password. If you have forgotten your password in theory you can get a new one by asking for a reset to be sent to your email address of record, but this doesn't always work. Andrew the webmaster is working on this on behalf of Prof CP who has had a series of log in problems.
Viewing tables is easiest if you use the print button, particularly if you are on a smartphone or small laptop, even if you don't want to print. More for paid subscribers follows:
Your editor has been a faithful weekend reader of Barron's since before she started her newsletter, and while the "Roundtable" is always a good read she tends to discount its investment advice. But in the Trump Era I have noticed something new in the contribution from the seven knights (and two dames, Meryl Widmer and Abby Joseph Cohen). Trying to predict what's ahead for the markets the pundits have gone more global than is their wont this year. Read more »
This is our first shot across the bow of the Goodship Trump. A second company in our portfolio has followed Teva getting into trouble with the US Department of Justice and the US Securities and Exchange Commission, following Teva's fine for bribing state and federal insurance bodies in Mexico, Ukraine, and Russia to boost prescriptions for its multiple sclerosis drug Coapaxone. The last company to have been hit with fines from both for payola is Soquimich, the Chilean miner of potash and lithium. Like Teva it comes under the Foreign Corrupt Practices Act passed by the US legislature, supported by both parties when the Senate Foreign Relations Committee was headed by Frank Church (D-Iowa) and my boss, Clifford Case (R-NJ). That law became a model for other countries aiming to fight payola in winning contracts. Read more »
Happy Inauguration Day
Here are some Bubble or Trouble foreign policy outcomes facing the new Administration. Harvard Government Professor Alaisdair Ian Johnston wrote in its November Epicenter blog:
“Trump’s expected China policies may have a direct bearing on [American] welfare.
“Taken at his word, he wants to impose high tariffs on Chinese imports to compel Beijing to appreciate its currency, stop stealing US intellectual property, and open its markets to more US investment and exports. Many economists expect that China will react—at least initially—by raising tariffs on US goods, further restricting US investment, while shifting imports to alternative markets. The result will be a trade war in which US consumers are harmed by inflation, with no concomitant regrowth in traditional manufacturing jobs, and possibly a reduction in critical exports to China, such as aircraft.
“The Chinese may even engage in cost-imposition of their own by dialing up conflict on a range of other issues (North Korea sanctions, counterterrorism, international health, cyber commercial espionage, Taiwan, maritime disputes) to remind the US that China can impose costs too.
“Trump may change his mind about the wisdom of high tariffs as he listens to corporate advisors, and as he contemplates the costs to Chinese partnerships he seeks for his own personal wealth. Instead he may simply impose some symbolic cost on China and then sell this as a major policy victory.
Then Warning on Global Warming
“Any decline in cooperation with China on global warming may not be considered a welfare cost for Trump, given his apparent belief that anthropogenic climate change isn’t happening. But it will make China, [not] the US, the 'responsible stakeholder' on climate change. Other countries will look to Chinese leadership.
“The unintended or unpredictable effects of his policy preferences, personality traits, and personal economic interests may be even greater if, as his initial appointments suggest, his China policy team reflects the gamut of GOP factions—moderate Asia specialists, Tea Party-leaning advisors who support tough economic and military policies toward China but are less interested in exporting US values, and neo-cons who want to be more proactive in undermining the legitimacy of the Communist Party.”
His colleague in the Government Dept., Jorge Dominguez, wrote on:
“Trump has the opportunity to advance policies to promote interests that the US and Latin America share. The US does not encounter in Latin America many of the challenges elsewhere. No terrorist attack has been launched on the US from anywhere in Latin America. There are no US troops in combat in the region. There are no nuclear-weapons states in Latin America, nor are there interstate wars. The last revolutionary insurgency is likely to be ending in Colombia.
“[Regional] governments are looking for ways to cooperate with the US. Mexico has been, for many years, a far more important destination for US exports than China; and Mexico and Canada are a key part of the explanation why there are still automobiles manufactured in North America. (US auto companies would have gone bankrupt without their NAFTA partners or without the US government’s rescue of these firms.) Here’s a critical fact that was overlooked in the US election: net Mexican migration to the US has been at zero (yes, zero!) for the entire current decade. There is an opportunity to think constructively about immigration policy.”
These are risks beyond the messy divisions in the new Administration also on tax policy and exchange rates. But the impact on stock markets will be great. We are continuing to look for new postions or ones to add to, and there is one today.
More for paid subscribers follows from the Dutch Antilles, Canada, Japan, South Korea, Mexico, Israel, Brazil, and Panama. Read more »
Our Trump Portfolio part I
Today we begin our Trump portfolio to gain from the geopolitical and economic changes expected under the new president. For the record, I am not trying to forecast how US stock markets will behave over the next year or years, because so many of the policies of the new Administration can have ambiguous impact on stock prices. This is discussed below for paid subscribers.
We also have news about various companies, which doesn't stop just because there will be a regime change in Washington, with news from Britain, India, Ecuador, Colombia, Israel, Mexico, Canada, Brazil, the Dutch Antilles, and Switzerland.
Contagious Conflict of Interest
The Trump team seems pretty disunited to me with one exception—contagious conflict of interest seems to mark the selected Administration nominees. I wrote yesterday based on Bloomberg articles about Anthony Scaramucci of Skybridge Capital who in Davos engaged in deal talk with a banned Russian sovereign wealth fund. I am relieved to report that Mr Scaramucci has now opted to exit the hedge fund he founded although it will take about 3 months. Better late than never.
But other conflicts of interest among the nominees which were not as flagrant do not appear to have resulted in similar divestitures. This creates a dangerous precedent not only for future Republicans taking government jobs but also for Democrat who do.
More today on Ireland's outlook and the boost to the American Depositary Receipts market your editor anticipates with news from Brazil, Mexico, the Dutch Antilles, Canada, Israel, Sweden, Australia, Thailand, Belgium, India, Sweden, South Africa, Britain, and Ireland.
The Manchurian Candidate?
From Bloomberg from Davos, a note about the possible Manchurian candidate who is about to take the oath of office as president of the US:
"Anthony Scaramucci, aide to President-elect Donald Trump and founder of SkyBridge Capital, discussed possible joint investments in a meeting in Davos with the head of a Russian sovereign wealth fund that the U.S. sanctioned in 2015, the fund’s press service said.
"The meeting with Kirill Dmitriev, head of the Russian Direct Investment Fund, a $10 bn state-run investment vehicle, is the first public contact between the incoming administration and Kremlin-backed business. Scaramucci confirmed the meeting in an interview with the Russian state news agency TASS, saying that Trump’s view is that 'there’s probably shared values or shared interests, that we can align ourselves with each other and this could be mutually beneficial'." Oy.
Wall Street's Best Investments sent me this note from my blog, www.global-investing.com, asoit is now in the public domain:
“The CEO of this global insurer recently remarked that the company was interested in ‘big takeovers’ in the U.S. This stock is a play on rising rates.
“Allianz SE (AZSEY 17)
“From Global Investing
“Allianz SE (AZSEY) has taken its time recovering from the walkout of Bill Gross, which was our motive for purchase. But with the global economy shifting gears after the shocks of 2016, for 2017 there is much to be said for the corporate bond market where Gross was rainmaker, then based at the Allianz sub in California.
“AZSEY of Germany still is the largest shareholder in Pimco, which is likely to benefit as US and global bond prices reverse as interest rates rise. Since the Brexit vote and the US election, the bond market has begun this switch to higher yields and lower prices, spooked by fear of inflation. This made interest rates rise more than expected above all in the US. The result is that after experimenting with low and even negative interest rates, the world is returning to normal. Normal means yields are positive and rising again. It also means that using stock dividends as a way to earn money with your money is no longer a slam dunk victory.
“It is uncertain if the reversal will continue long and high because of secular changes. Global debt levels are up and aging population in the industrialized world means they will be retiring and spending less. That will nip growth and inflation in many countries but probably not in the USA (given the Trump plans) nor in Britain (because of the fall in sterling post-Brexit.)
“Bonds will also become scarcer if the US tax report program of the new administration will include an end to the tax deductible corporate bond, widely used lately for share buybacks and paying dividends rather than for capital expenses. With fewer bonds available and the need for yield remaining, getting bond manager fund help will become crucial to investors.
“The bond market, unlike that of shares, does not work well with indexes and exchange-traded funds. You need real experts examining the market for the best returns at the lowest risk. For US investors, that probably means entrusting their pensions and assets to San Diego-based Pimco again. It won't be Bill Gross but we will need another bond king. The new ruler of the bond market will have to be able to invest in multiple markets, not just in the USA where Gross flourished. With greater integration with the insurance arm of Allianz in Frankfurt, Pimco is well-placed to rise to the challenge.” (Vivian Lewis, Global Investing, www.global-investing.com, December 30, 2016.)
More follows, if briefly, for paid subscribers today with news from Sweden, Finland, Denmark, Canada, Australia, Britain, Chile, Spain, and Mexico.