Sunday Tables PLUS
Today's tables are posted at www.global-investing.com where they are easier to read if you hit the printer-friendly button. After our outage last week it is now at the bottom of the page not at the top.
There is news today because I am attending a conference call on Monday morning which will delay the news part of my daily. Read more »
Down With Good News Bears
Down with good news bears.
Today I quote fund manager and newsletter writer Gen Joe Shaefer, USAF-ret. He reacted to the Wall Street gloom over surging US non-farm payroll levels. The unemployment rate is now below 5%. And belaboring the obvious, Bill Gross, formerly of Pimco, says there is now “a 100% chance” of a Fed rate hike next month. Comments Joe:
“Stellar. Superb. Wonderful. Don't let [a] knee-jerk reaction deter you from investing today. America's private sector added 268,000 new jobs in Oct. (Governments added another 3000.) 'Expectations' were for [only] 180,000 jobs. It is high time we got our economy and our country moving forward again, despite the over-regulation, over-taxation, and other shackles placed upon business these last few years.
“This report is great news for our poor, our middle classes, and our nation.
“Since it gives the Fed the cover it needs to raise rates in Dec., however, the market open [ed] down today. That's so dumb. Yes, it means rates may rise by 1/4 of 1% or so, and keeps the dollar strong which may continue to keep [down] earnings from US [global] firms. Tough. I'm tired of the whining from hedge funds and those with K Street lobbyists. This jobs report is, plain and simple, good news for the country.”
Note that Euro-land exporters to the US are the risers in today's market. They are expected to gain when their US$ earnings are translated into more euros. Panama stocks are also up; the country uses the US$ as its currency but has Latin cost levels.
Our sale of India's Dr Reddy's Labs 3 years ago was over fear that Indian drug manufacturers were violating safety and sanitation rules. I resisted calls from NRI readers to buy back the NYSE listed Indian “blue chappati” share. It took until today for RDY to be hit with a US FDA ban which took the stock down 19.83%. The regulators banned imports from 3 RDY plants because of poor quality controls. My main reason for selling was to take profits, but as a sometime tourist to India I also know about the national attitude toward risk and cleanliness. In fact, with our Indian correspondent, Abhimanyu Sisodia, I worked on a proposal to enhance use of toilets by giving Indian kids books about using them. We did not win the prize.
Another chicken came home to roost when Amec Foster Wheeler reported on its rotten Q3 yesterday. We sold this arbitration play because I figured out that the oil refining and petrochemical industries would cut spending. Now Citibank, UBS, Barclays, and JP Morgan have all downrated AMFW (formerly AMEC) which got a go-pass earlier because they did investment banking for the Dutch firm.
To quote another mentor, Adrian Ash of www.bullionvault.com, our advertiser, “the non-farm payrolls report doesn't change the deeper direction of gold. That comes down to sentiment, built from how the wider world sees events building up over time.
“Consensus now finds bearish cues for gold inside the bullion market itself. Major and mid-tier miners are digging up record new tonnes, playing a version of 'the prisoner's dilemma' by trying to support their own earnings even as the world's record high output coincides with fresh falls in the price.
“The same dilemma faces all natural resource producers now. It's destroying the US oil industry. Even the Opec cartel can't agree to cap output or stick to the individual quotes already in place.
“[The difference] with gold, besides not having a cartel, is that the damn stuff doesn't vanish in use. It's indestructible. And using gold means keeping it safe. No one ever throws it away.
“So all the gold ever mined is still with us. So even 2014's record gold mine output, way up above 3,100 tonnes, added less than 2% to the world's stockpile.”
Adrian noted that the World Gold Council, which sponsors his cheap legal UK gold trading website and also the SPDR Gold ETF, GLD, is helping New Delhi market its new Gandhi coins. I had no idea. Talk about prisoner's dilemma!
The new Indian program also offers the country's gold bugs a “Giscard” gold-linked bond and a way to deposit up to an ounce of yellow metal in a bank to earn interest, and eventually redeem the gold for gold or cash. As I tried to write yesterday (but garbled it) the idea is that some gold-lenders will prefer cash so the gold can be sold to jewelry-makers.
More for paid subscribers today from Brazil, Israel, Britain, Australia, the Benelux trio, Ireland, South Korea, Panama, and France.
Just in time for the Hindu Dhanteras Festival, when it is auspicious to buy gold (Nov. 9), India is launching 3 products to reduce the trend to importing the yellow metal. Indians own about 20,000 metric tonnes of gold held in what PM Narendra Modi calls “idle stockpiles”. This is about 4.5 times as much as the US gold stockpile in Fort Knox, according to Bloomberg. Moreover, every chance they get they smuggle in more gold which diverts investment from more useful channels.
The first program is one I am familiar with, as Modi got the idea from the “Giscard” gold-linked bonds offered in France in 1973 when I lived there. India will on Nov. 20 issue a sovereign debt bond which is linked to the gold price. I expect they will not yield 7% as the Giscards did.
The 2nd mechanism is a gold deposit plan. You place up to 30 grams of gold (about an ounce) at your bank and you can take back either the gold or cash after a term. The banks on-lend the gold to the jewelry market which is the key illegal importer of gold. Not everyone will want to gold rather than cash.
The third tack is familiar too: a new gold coin to be minted in New Delhi, bearing the image of Mahatma Gandhi, a fine patriotic way to own gold.
Your editor owns but dares not wear a 24-karat gold bangle of immense value purchased for her by her husband on a trip to Dubai's gold souk. The bangle was sold by weight and had he not bought it, it would have been shipped by dhow across the Indian Ocean. It is now in the safe, an idle stockpile.
One of the under-appreciated advantages of American Depositary Receipts is that they offer foreign stocks which have no US equivalent. Apart from the board when you play Monopoly, there are no really world-scale waterworks companies and sewage management companies in this country. Britain has a bunch privatized under Margaret Thatcher, which are mainly regional. Japan has one. France has two, Suez Environnement and Veolia Environnement.
The ADR world is full of unicorns, big companies with unique businesses that earn big profits. An ADR unicorn is a company which has no real US competitors.
And in case Jeb Bush is not aware of it, French multinational corporations operate worldwide and make money. They do not confine their workweek to 2 ½ days as he claims. So naturally we are long term holders of a waterworks firm from France which reported today, along with a telephone company dominating TV and media, and a fertilizer company producing plant food flat-out and profitably.
Paid subscribers should read on for news from France, Canada, Britain, Israel, and Ireland today. Plus 3 unicorns reporting.
Sunshine and Grouses
The sun is shining and it is warm in New York city so naturally stock markets are down.
I am not over-weighting trivial factors. Consider what happened in Asia in the wee hours today. A proposal to link the Chinese stock market of Shenzhen to the free-er one in Hong Kong was published by mistake. The news of the link had already come out in May (we reported it) and no enabling rules have yet been set up. Shenzhen is a short train journey away from Hong Kong.
In China's frenetic market, any bit of positive gossip is an excuse for neophyte investors to pile into stocks. And they did. Shanghai rose 4.3% and Shenzhen 5.1%. Hong Kong's Hang Seng only went up 2.1%.
A yen for mail? Meanwhile, across the water (still not claimed by China), Japan Post was ipo'd as a private company and immediately rose 26%. Mail is not all that JP handles; it has vast banking operations that fund the government deficit and QE policies. Its army of letter carriers act as tax, health, and social workers to oldsters stuck in country villages far from their offspring. Read more »
News Beyond GSK R&D
Gold is flat on its back again, with no rise since the start of the year at $1115/oz. Oil meanwhile has gushed in price to $48.18/bbl, up nearly 4.5% just in time for Thanksgiving driving and colder weather.
And Pres. Xi Jinping of China now expects that it can meet its 5-yr plan goals by growing only 6.5% which will still achieve Gross National Production in 2020 double that of 2010.
Having spent the morning learning about a major R&D plans at one of my long-term drug stock favorites, I summarized only the big macro news before setting to work writing up the drug stock later. It is British GlaxoSmithKline.
Meanwhile we have news from Britain, India, Israel, Italy, Ireland, Luxembourg, The Netherlands, Jordan, Brazil, and South Korea, mostly about drug companies today.
The purchasing managers reported today on factory orders in October. China disappointed markets as the Caixin PM index again showed slowing order levels, at 49.5 for the month. Anything under 50 shows contraction.
However, Britain's PMI came roaring in at 55.5. The Eurozone PMI also showed good gains, at 52.3. The US PMI published later by the Institute for Supply Management was less uplifting, at 50.1 today, barely positive.
The Chinese data squeezed down the Shanghai stock market index by 1.7% and the contagion spread to other Asian markets. However, markets were buoyant across the pond after the sharp rise in orders.
Our email blast to garner new subscribers launches tomorrow morning. If you have considered becoming a paid participant, now is the time to get your trial sub more cheaply.
I am mourning the Mets and unhappy that no US New Yrok marathoner came in higher up than 7th in the men's and women's races yesterday, beaten mostly by Kenyans and a few Ethiopians. The ladies were more varied. If Barrack Obama really was a Kenyan he would be cheering, but despite Donald Trump's charges, he isn't Kenyan except by half his ancestry.
Moreover Barrack Obama Sr was a Luo from the lakes, not likely to have benefited from a lifetime buildup of lung capacity because of living in the Highlands.
More for paid subscribers today from Israel, Germany, Britain, Canada, Hong Kong, India, The Netherlands, South Korea, and Bermuda today. Tomorrow's blog will be late as I am going to a conference on R&D by a non-US pharmaceutical firm.
I have just posted the model portfolios at www.global-investing.com which show that we did okay in October by not panicking, although only a few of our shares really soared. To view the tables, visit our website and click onto the performance button under the masthead; it is easier to view spreadsheets by hitting the "printer-friendly" button even if you do not want to print.
All our tables are visible to the paid subscribers among you whereas pre-subscribers only may view our closed positions table. Disgracefully, the latest tables show that a closed-end fund launched last summer to which I and my readers subscribed has been yanked from the market along with 3 others by the fund manager. It collected our money in August for AZIA, GlobalX Central Asia & Mongolia ETF. That is not how respectable fund managers used to behave. When Templeton Funds closed its fund to invest in Vietnam, because Mark Mobius couldn't find stocks to invest in, shareholders were given a chance to switch to another open-end fund in the Templeton fund group at no charge.
Those days apparently are gone forever and now Mark Mobius has been ousted and Sir John Templeton is dead.
Happily the gas lines are now reattached to our local Chinese carry-out shop's woks, and I can celebrate the end of Hallowe'en, the NY Marathon, the daylight savings time change--and mourn the likely end of the World Series--with a good feed. The restaurant, a fave with employees of our local USPS (many of Chinese heritage and other willing to learn from their colleagues), is open during the week but had been shut for the gas line repairs on Sunday.
More for paid subscribers follows:
This morning's blog is late because I was listening to Bill Ackman of Pershing Square Management defending Valeant, down $9 at the opening. He was upbeat for over 3 hours and quoted Warren Buffett: “be fearful when others are greedy and be greedy when others are fearful.” First I had to disable my Avast antivirus blockage of cloudflaressl to get into the PSH website. More for paid subscribers on this below.
While the US warship entering the supposed closed Chinese waters around its newly created islands has led to warnings, the Philippines has won the right to sue at an international court in The Hague enforcing the UN Law of the Sea Convention, with both countries have signed. China is boycotting the proceedings for now.
In China today, the renminbi soared after the People's Bank of China, their CB, announced a “trial” program allowing local Chinese retail investors to by foreign securities in Shanghai. The currency was up over 0.6%, which in currency markets is big.
Do not rush to buy stocks of Chinese baby suppliers like Mengniu Dairy. We owned it under another name after the baby-milk powder scandal some years ago. Remember it takes 9 months or more to produce a child, and the new 2-child regulations have not yet been promulgated.
A couple more quarterlies from Holland, Britain, Bermuda, and revised results from another firm we wrote up yesterday. Plus news from Sweden, Denmark, Norway, Finland (a full Nordic!), Britain, Israel, Ireland, Switzerland, Bermuda, India, Mexico, South Korea, Canada, Spain, and Germany.
On Weds. after the Fed indicated that it would consider tightening interest rates before the end of the year your editor sold some XIV, a reverse play on volatility, at a profit. XIV, formally Velocity Shares Daily Inverse VIX short-term ETN (exchange traded notes) are used to offset stock market ... volatility (or risk). I did not sell my SPDR Gold, GLD, because that would have resulted in higher capital gains. But I wanted to add some dry powder for buying shares in stocks abroad without dipping into my cash cache.
I kept the XIV in my IRA still at a loss. I don't take losses in the IRA because they serve no useful tax purpose. This kind of strategy is the unfortunate effect of the way our tax code works.
I griped about the monopoly drugstores in Manhattan driving the small pharmacists out of business. The midtown east area where I live is seeing many closures of restaurants: Guastavino, now a catering joint left empty most of the time; Chez Joule our local French bistrot; Pasta Pesce, the best and oldest Italian eatery; and now Sofrito, a barn-sized Puerto Rico themed bar and dining hall.
Our supermarkets are also reduced: our local D'Agostino store, from a venerable NYC chain, was sold to Morton Williams. Next week, “The Bridge Market”, next door to Guastavino and the former Conran shop under the Ed Koch bridge, will shut, an upmarket Food Emporium opened with great fanfare at the turn of the century. Its owner, Great A&P, is a sub of Tengelmann of Germany. Who knows at which level of the complex the closing was decided. Now City Hall will have to find a new tenant for the vast 2-story site under the bridge.
I was wrong that there is no ADR for Walgreen Booth Alliance, the Swiss ultimate owner of the acquisitive drugstore chains in Britain, the US and elsewhere. The ADR is odd, WBA, a 3-letter one on Q, WBA where most have 4 letters. AS this ADR maven didn't know about it, chances are there was scant information given after Walgreen shareholders were bought out.
More on ETFs and stocks from Israel, Ireland, Italy (a trifecta!), Denmark, Finland, Canada, India, and Singapore. Today we had one of those results-laden Thursdays and I am swamped.
Fed and Drug Day
Today is Fed and drug day, the latter after the merger of Walgreen-Boots Alliance with its competitor Rite Aid in an all-cash $17.2 bn deal. This takeover was worked out in Europe, where Boots of Britain is controlled by an Italian magnate operating out of Switzerland. And it creates an upbeat backdrop for trading in drug stocks and retailers worldwide.
As I wrote yesterday there are strong reasons for adding non-red-white-and-blue non-US stocks to your portfolio as our domestic growth is impacted by low oil prices and an over-valued dollar. Today you should note that despite the drugstore chains being HQ' in Deerfield IL (Walgreens) and Camp Hill PA Rite Aid), their new ultimate owner is not a US company. The US arm of the buyer company is a Delaware holding company whose shares are wholly owned by a Swiss company traded in London.
Alliance Boots GmbH is run from Bern (Switzerland) where it was formed in 2004 by a merger of Alliance UniChem, an Italian company operating in dozens of countries, and Boots, a UK High Street drugstore chain founded a century ago. The ultimate owner is Stefano Pessina with help from KKR, the private equity group (AKA Kohlberg, Kravis, Rogers). It trades on the London Stock Exchange. There are no American Depositary Receipts. There is therefore no way US investors can easily buy into this conglomerate cutting its costs and boosting its business by consolidating the US drugstore markets.
After the Walgreen takeover, the WBA group, listed in London, managed to snag a local NYC drugstore chain, Duane Reade (named after the Manhattan intersection of Duane and Reade Sts), my local pharmacy after Pliskin's Drugstore closed. There used to be a Duane Reade on every block in Manhattan but now they are shutting some. The firm also does wholesale drug distribution and supply chains. It also operates pharmacy benefit programs for insurance companies.
Its pharmacies however are independent of drug producing companies, the scandale du jour affecting Valeant and Novartis, of Canada and Switzerland respectively. But as the conglomerate mops up rival drugstore chains you can expect that competition in the filling of Medicare and Obamacare prescriptions will sink.
Also boosted by European developments is the telephone sector, thanks to Liberty Media sweetening its offer for a Belgian carrier and BT (formerly British Telecom) snagging EE. While LBTYA is controlled by an American, John Malone, it is incorporated in Britain.
More for paid subscribers from the Mother Country (not about Boots but from the pharma sector), Israel, Italy via Luxembourg and The Netherlands, Ireland, India, Brazil, Australia, Denmark. and Belgium. That is a Benelux trifect, with 2 companies reporting from across the pond. Now that the Fed has decided not to cut interest rates below zero stock markets are more bullish.