Romansch and Zvitzerditsch

Mon, 2014/01/27 - 7:59am | Your editor

According to Neue Zuercher Zeitung today, of the 300-odd banks in Switzerland, 106 have now opted to cooperate with US authorities cracking down on tax evasion via Swiss banks. All the big banks have capitulated to pressure from the Americans to comply with data-sharing rules.

However, that still leaves nearly 200 Swiss banks which will still hide your money from the US taxman. If you make your way to a tiny village bank in some obscure Swiss canton, you may still be able to deposit your loot secretly, out of the reach of Uncle Sam. The problem is that to do so you will have to speak to the banker in Zvitzerditch or Raetian Romansch. The latter is the second language of Davos, where the present World Economic Forum is being held, a relic of Latin spoken by a few thousand mountain Swiss. As with Swiss German, the people from one village cannot understand those from the next. The time has come to get out those language tapes!

 

On the subject of linguistics, here is the first stanza of Robin Hood and the Monk from a 15th century manuscript collected by W.W. Skeat, and emended by Francis James Child (Cambridge University Collection):

In somer, when the shaws be sheyne, And leves be large and long,

Hit is full mery in feyre foreste To here the foulys song:

To se the dere draw to the dale, And leve the hille hee,

And shadow hem in the vest grene, Under the grene-wode tree.

Translations follow: hee is high; foulys are birds; shaw is woods; and... sheyne is beautiful. The last reminds me of the Yiddish ballad, bei mir bist du sheyne. In Yiddish sheyne still means beautiful as it once did in Sherwood Forest. Robin Hood and Little John spoke early English which shares words with modern Yiddish.

There will be no blog on Thursday as I am off to Paris for (among other things) looking for a new stringer. I was thinking of asking Valerie Trierweiler but gather she is too high-maintenance for our budget.

More from Britain, Finland, Israel, Ireland, Mexico, Brazil, Canada, the Nethrelands, and Norway today.

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Portfolio Update

Sun, 2014/01/26 - 8:14am | Your editor

After the horrible week for stocks which just ended, I would have liked to avoid posting our performance table. But discipline took hold and the stocks and bonds performance has been posted on our website at www.global-investing.com

As there were no trades (cf below) my closed positions table, visible to all, is the same as that of prior weeks.

I had some sales ideas last week but being prone not to panic, I set limit orders on them. And with the market so queasy, these orders did not get exercised. One reason is of course the time difference. With interviews after I blogged, I could not keep track of my brokerage accounts. It is extremely hard to access these from outside the USA despite my having warned e-trade and my bank (where my bonds and some shares are held) that I was heading abroad. This is yet another impediment to globalization which nobody has noticed yet. The world is NOT getting flatter; it is becoming more segmented.


The stock selloff, as always, was attributed to a minor statistic the market focused on last week, the below 50% (ie shrinking) level of the Chinese purchasing manager index. There are a couple of reasons why this is ridiculous as an explanation. FIrst there are two competing China PMI indexes, one official and one by HSBC out of Hong Kong. The former hits mainly big state-owned enterprises, who tell Beijing whatever it wants to hear; the other is more focused on smaller private companies. Neither is reliable and neither is ever revised (a mark of a serious index in my view.)

Secondly the Chinese New Year falls early this year, next week, so even Dec. orderbooks were kept light to avoid inventory buildup over the holiday.

A third reason may be that the combination of a money market fund failing and a crackdown on the shadow banks has made cheap cash for purchasing less easy for purchasing managers to find.

This is not a serious reason for stock market vapors around the world. The vapors are much more likely to be linked to a revival of uncertainly regarding central bank quantitative easing and cheap moeny. Here in Britain, the target unemployment rate for higher interest rates has all but been reached. In the USA the Fed has also to consider better numbers as it decides on what to do next, and under a new and unknown lady governor to boot. (Of course I am delighted that Ms Janet Yellen in this top job, but that doesn't mean the market is!)

Another even more basic reason is reversion to the mean. In 2012 and 13 markets produced hefty gains, mainly because there was lots of cheap money about looking for a home. The ultimate parameters for this continuing depend on company performance living up to the various ratios and percentages which define stock market value. They are not coming from the leading blue chips in whatever market you look at: Deutsche Bank or IBM  for example.

Moreover, the classic value-destruction strategy--mergers and acquisitions--is back in the news, with mega-deals around the globe. This is also scary for those who have booked nifty gains over the past two years, and worry they will be dissipated.

More less gloomy news for paid subscribers follows from London about Norway via Nairobi:

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Taking Tea?

Fri, 2014/01/24 - 10:09am | Your editor

 

Your editor took tea yesterday with British economicanalyst Andrew Sentance, author of a new book called Rediscovering Growth: After the Crisis. However, in fact we drank decaf cappucino at the HQ of PricewaterhouseCooper, where he is senior economic advisor. PWC is located in a 3-yr old new building within shouting distance of The Shard, at More London Place, which is not even mentioned in my London A to Z guide.

This site summed up the new British growth areas Mr. Sentance writes about, a driver for recovery.

His book casts doubt about much current economic chatter, like the idea that only making things matters. Too much statistical weight is being given to goods exports (which are quicker to be tallied), and not enough to service exports.

Britain's edge, he argues, is no longer not in bashing metal or weaving cloth. Read more »

Great Wall Crash

Thu, 2014/01/23 - 8:23am | Your editor

While there will not be an ADR, Saudi Binladen, a $ 2.7 bn-sales family-owned construction and building materials company, plans to do an initial public offering of about 20% of its shares before the summer heat sets in. The firm is controlled by the Bin Laden family, a local business dynasty, one of whose members created Al-Qaeda. I'll give it a miss.

 

Following up on my speculation yesterday on why Mohamed El-Erian quit Pimco, it appears that no fewer than three executives are required to replace the former CEO and co-Chief Investment Officer (shares) at the California bond house. One of them is the new deputy chief investment officer, senior man in share, Andrew Balls, a British analyst, former correspondent for The Financial Times. But his post is not only because of his journalistic experience. He is the brother of the shadow (Labour Party, opposition) Chancellor of the Exchequer, Ed Balls, certainly richer and reportedly smarter. Ed Balls, his brother, has the unenviable task of attacking the rather successful economic policy of the British coalition government in Parliament.

The real issue is succession planning for the head of Pimco, Bill Gross, who is 67. He is the public voice of the investment house, a bond bull, not exactly fashionable today. Pimco needs to lure in investors to its funds. Will Mr. Balls become his heir-apparent?

The Great Wall crashed. On Tuesday afternoon Jan. 21, Chinese netizens could not access the Internet, the largest outage by number of users (over 600 million accounts out.) The outage was blamed on a malicious cyber attack by China's Computer Network Emergency Response Center. However, censorship-tracker services now say the Chinese language web went down because of China's Great Wall (to stop politically incorrect web sites) had gotten out of hand. Techies say the Chinese Internet gateway domain servers had been contaminated, perhaps only failing at one point. But because all Chinese-language connections are funneled through the servers to stop porn, gambling, and dissident comment, much of the country went down.

More for what this means for our companies and news from Finland, Canada, Jordan, China, Britain, Spain, Singapore, Ireland,  and other places follows for paid subscribers only. If your blog ends here, your sub has run out. You should also have received three notifications but they may have been blocked by excessively zealous spam-blockers hunting marketing e-mails.

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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.

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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.

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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.

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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.

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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.

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