Special Birthday Blog

Sun, 2016/06/19 - 6:34am | Your editor

Somebody has to celebrate her birthday in Paris, and today it is my turn. There will be no tables becauseI cannot get the information I would need in gai Paris.

Our celebration will begin with lunch in the Plaetzel, the Jewish Quarter of Paris, followed by a Chopin concert if the rain holds off, and dinner at an Auvergnat restaurant. But before the feast, here is some news, on Sunday for a change.

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Thu, 2016/06/16 - 6:50am | Your editor

A start-up Utah truck-maker, Nikola Motors, bearing the first name of Nikola Tesla, a pioneer in developing the electric grid, in its US stock prospectus announced receiving 7000 “pre-orders” for its Nikola One model. This is a ground-breaking purely electric truck using the same lithium-ion battery as the Tesla auto, only bigger, with 18,650 LI cells producing 320 kiloWatts/hour. It also re-uses the energy from braking to power a 2000 horsepower engine that can cover 1200 miles before it needs to be re-charged.

The first Nikola prototype will be shown at the end of this year, and will cost $400,000 to $550,000, meaning the pre-orders are worth over $3 bn. Nikola is offering the buyers free recharging for the first million miles of use, which the company says means the truck will pay for itself during that period, whereas a gasoline or diesel truck will have cost haulers as much as $100,000 to cover that distance.

Salt Lake City-based Nikola Motors is using its pre-order campaign in an attempt to raise $400-$500 mn dollars of investment. Reserving a truck costs only a $2000 (fully-refundable) deposit.

We have a stock for this trend, not Nikola Motors itself.

The MSCI Asia-Pacific index markets are down 1.1% today over spreading worries about Brexit and the yen (a safe haven currency in the present period) rising to 104 to the US$. This pushed down the Japanese indexes down index by ~3%.

Deutsche Bank meanwhile hit a new low. Sterling, which rose yesterday, fell back again today as new polls showed a higher level of British support for leaving the European Union.

There will probably be no blog Friday as I will be taking the Eurostar to Paris. In shops around the Paris bourse you find vendors of “Napoleons”, gold coins supposedly issued in the middle of the 19th century by Napoleon III which actually are counterfeited. They hold the right amount of gold but are modern with false hallmarks, so their valuation is purely based on their gold content. With gold at over $1311 per ounce today, even higher than in Jan. 2015, I want to see what the pseudo-Napoleons fetch. As for why people are buying gold? Try Brexit; the Donald and terrorists; no imminent rate rise anywhere; Chinese and Russian saber rattling; Argentina inflation figures.

My own theory? Gold is less volatile these days than crude oil.

Today's news is mostly from Finland, with bits from Britain, the Emirates, India, Canada, Australia, The Netherlands, Ireland, Denmark, Japan, Hong Kong, Israel, and Argentina.

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Brexit Outcome?

Wed, 2016/06/15 - 2:41pm | Your editor

For whatever it is worth, and it is not much, the UK bookies' show an overwhelming level of support for Britain remaining in the European Union rather than exiting from it. Our reporter Martin Ferera, a former white British resident born in Zimbabwe, comments from Canada where he now lives:

Can the EU continue with youth unemployment so high, with barely noticeable economic growth, with mounting political discord? Over the last 15 years Europe meant economic atrophy along with an influx of immigrants who might have been accommodated had the EU economies been growing but it is stagnant. So they live in ghettos where Islamists flourish. This has stoked fascism and xenophobia outside the ghettos.

Without economic recovery, there is no hope of dealing with this split and prosperity is unlikely if things stay as they are.

It is unlikely that the euro currency in its current form will be around in 10 years time, perhaps not even in 5. This is the elephant in the room. Without euro reform, the EU will fall apart. To keep the whole shebang together, huge compromises by everyone are required, like pooling fiscal and sovereign authority, penalties against surplus countries like Germany, and unpopular economic and structural reforms. To make reforms work, the EU must become more democratic instead of techno-bureaucratic.

If the British vote for Brexit the EU may not survive. If they vote to leave, I pray it will be understood as a huge wake-up call for EU political elites who then start to make changes so the EU becomes workable. If the British vote to leave then the sensible thing is to immediately agree an accession deal so that the UK is still economically integrated with the EU to minimize economic disruption. Without this both Britain and the Eurozone will fall into economic depression

If they threaten the UK with economic barriers (like German Finance Minister Wolfgang Schaeuble), the EU will prove to be beyond saving in a global economic decline. This the Eurozone lacks the resources to overcome. If EU leaders opt to “punish” Britain, they how can they tackle reform?

It is unlikely that other members except Hungary will also aim leave because many of Europeans remember what life was like before their countries became members. Not Greece; no chance as they know they cannot survive on their own. Portugal and Spain ditto. But insiders might want a new deal if the British get one like I hope for if the UK is seen to prosper. That might then create the environment in which the EU could reform in a positive instead of a destructive way.

Something has to change. If the British vote to stay, it may simply delay the change. If they stay, I hope the EU leadership tackles its issues in a framework less disruptive than post-Brexit. But I fear that if the UK votes to remain, I fear 28 disputatious countries in inertia and complacency will fail to agree on anything at all.


Other news: MSCI is not adding Chinese A shares to its key emerging markets index, which means that index-trackers will not satisfy the bulls in the China shop by being required to load up on Shanghai stocks. After the confused interventions ordered by Beijing in the last ten months the index-makers were unlikely to reward. Pres. Xin for his economic savvy. Chinese bulls are unfazed by the news and the index is up 1.6% today. More on indexes below for paid subscribers.



More for paid subscribers follows from Spain, Mexico, Israel, Belgium, Britain, Argentina, and Pakistan, mostly on Brexit stock picks. But first an important note from India:

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The Trumpish Briton

Tue, 2016/06/14 - 11:02am | Your editor

I arrived in London just in time to see sterling drop 1% over the latest polls on whether Britain should exit the European Union. My husband (a British subject) has a pile of anti-EU messages from the vote to leave side, and one only from the stay side. He has just gone to vote his absentee ballot. The Brexit propaganda is at the same level as Donald Trump's in the USA: lies, damn lies, and statistics.

The EU is said to cost “us” (Britons) £350 mn per week, a ludicrous sum. It is said to require that Britain “bail out the euro” although as a non-member of the single currency, Britain merely has to bail out sterling and its own banking system Read more »

Greetings from JFK

Mon, 2016/06/13 - 2:42pm | Your editor

My flights are on because KLM pilots are not on strike, only those of Air France, and I am blogging from the Biz Klass lounge at JFK. The normal Sunday tables have now been posted, except for the closed positions one, which I haven't bothered with as there have been no trades last week. However because of my brokerage account moving homes there will be some changes next week.

To view the tables please visit www.global-investing.com and log in with your password and then use the printer friendly button to view the spreadsheets.

More for paid subscribers follows:

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Soros as Guru?

Fri, 2016/06/10 - 12:39pm | Your editor

George Soros, now 85, is back making macro bearish bets, this time against China rather than the Bank of England, and in favor of gold and, apparently, Argentina. This is a repeat of his decades-long involvement in Argentina during the reign of the Kirchner couple.

The billionaire of Jewish heritage survived the Nazi occupation of his native Hungary as a teenager and then studied at the London School of Economics during the hard-scrabble early post-War years in Britain. From this history he gained an unAmerican tendency to view cataclysms as a normal part of life as well as great self-confidence ultimately resulting in his immensely successful bet that sterling would have to be devalued in 1992.

Is China facing a doomsday scenario? In my view Soros knows no more about China's prospects than anyone else, up to and including Pres. Xi Jinpin. He likes democracy and wants countries refusing to allow it to fail, China and Russia among them. It is only thanks to his correct call 24 years ago that people listen to Soros.

I last met Soros at a dinner party in Brooklyn about a decade ago. He was given a hard time by the lady sitting his other side, Alexandra Schlesinger, wife of the Harvard Professor, who quickly dismissed his theories about “reflexivity” causing booms and busts in the financial system. It amounted to saying that causes can turn into effects, and visa versa.

Accustomed to being treated as a guru, Soros was visibly squirming as she popped holes in his system of economic analysis. She also exposed gaps in Soros's education as he turned out to have no opinion on the impact on business cycle of Schumpeter-type creative destruction when asked for one. (Joseph Schumpeter was always a top figure in Harvard economics courses because he taught there after leaving Austria in the1930s. The late Mrs Schlesinger and I are Harvard grads.)

For whatever it is worth, Soros may have been the ultimate winner in the debate Mrs Schlesinger could not have conceded because she died a year or two after that dinner. His prediction of instability and breakup in the European Union proved right although I am not sure if he managed to invest to profit from it. But his Open Society interventions in Hungary and elsewhere in eastern Europe totally failed to catch on with the natives who are supposed to learn about democracy from outfits he funded.

At the present juncture I am inclined to follow Soros into gold and Argentine. Note that Marc Faber, who writes the Gloom, Doom, & Boom Report, whom I also have met, expects China to achieve a soft landing and thinks gold is overpriced at present. Both gurus think there will be a US stock crash.

I also am impressed that Soros has gained impressively in his family fund from investments in Japanese small caps, as reported in Bloomberg-Business Week.


There will be no tables this Sunday because of the Jewish Shevuot (Pentecost) holiday. There will be no blog on Monday as I am flying to London via Amsterdam unless the AirFrance pilots' strike stops KLM.

More for paid subscribers starting with bad news from India and Brazil, and good news from Canada, Finland, Israel, Britain, and India.

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Gorky and Karloff

Thu, 2016/06/09 - 1:22pm | Your editor

As we are off to London next week my brother-in-law is offering us unique entertainment opportunities he wants to book. What shall I say to the Southwark Playhouse showing of Vassa Zheleznova by Maxim Gorky, sponsored by the Boris Karloff Foundation? Here is the blurb:

“Vassa is the head of the business, head of the family, a self-made millionaire. Exactly how far will she go to keep things that way?

“Attacked by the striking dock workers, disregarded by her daughters, humiliated by her husband, and with few people to trust, this matriarch has got her work cut out.

“Emily Juniper’s searing adaptation transposes Maxim Gorky’s seldom-seen masterpiece to the 1990’s Dockers’ Strike in Liverpool in a new production from award-winning ensemble The Faction.

“Playwright, activist and sometime political exile Maxim Gorky (1868 – 1936) was a founder of socialist realism and nominated for the Nobel Prize for Literature five times. His revision of Vassa Zheleznova was performed by every major Soviet theatre within 5 years of publication. This production commemorates the 80th anniversary of his death on 18 June.”

Today's the day the British ETF invitation was wrong. It looked like this:

Improving fundamentals mean Emerging Markets
shouldn’t be ignored

Date: 28 June 2016 | Time: 2.00 pm (BST) | Duration: 50 minutes

Guest Speaker: Fredrik Nerband, Global Head of Asset Allocation, HSBC

A few minutes later, this came into my emailbox:

Dear Sir/Madam,
This morning we may have accidentally sent you an email about a webinar titled “Improving fundamentals mean emerging markets shouldn’t be ignored”.

You should not have received this email, please therefore ignore its contents, do not act on it in any way and delete it from your system.

We apologise for any inconvenience caused.

Yours sincerely,

ETF Securities



*Dong Energy of Denmark became the biggest ipo this year and rose 10% in its first day of trading to Dkr 259/sh. It runs offshore wind farms. The sellers include Goldman Sachs (which is keeping 13.4% of its former 19% stake, however.) Goldman financed the switch to wind by Dong 2 years ago when the Danish government refused to, and quickly doubled its money. The US investment bank set firm conditions for its investment including an IPO by 2018, getting put options, veto rights on changes in investment and strategy, and other conditions to limit Copenhagen interference. The govt until now owned 59% of Dong.


More mistakes are included it today's blog, by me and by others like Bloomberg, along with news from various countries for our paid subscribers. A lot about Mexico for a change, and more deals out of Hong Kong and more Latin finance moves.

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Yield Hunger

Wed, 2016/06/08 - 1:40pm | Your editor

A bullish CEO Charles Payne at Wall Street Strategies wrote today:

“Oil takes out $50, the Dow takes out 18,000, and the S&P looks convincing above 2100. While virtually every measure of the broad market is at the top of its trading range, there are still lots of stocks with room to the upside. As the breakout action is confirmed by closing above key levels, it becomes a self-fulfilling prophecy as shorts are forced to cover and money comes off the sidelines."


German growth has picked up despite or perhaps because of negative interest rates for bonds with duration below 10 years. And as BofA-Merrill Lynch writes today, the 10-yr bund yields all 0.05%. The Thundering Herd also noted that Toyota Finance Corp issued ¥20 bn in 3-yr unsecured bonds bearing a coupon of 0.0001%. The European Central Bank will start buying corporate bonds July 18, with the terms published today. Bonds have to be out already and actively traded, denominated in euros and be issued in the eurozone, and be rated investment grade. Little wonder that Japanese and German bond-buyers are moving instead to buying US bonds, despite the Fed hinting at further rate hikes this summer or fall. If interest rates rise, existing bond prices will fall.

Marc Chandler, the currency expert at Brown Brothers Harriman, wrote today on seekingalpha.com:

China's May trade surplus stood at $49.98 bn. This is larger than April's $45.56 bn surplus but less than the median expectation of $55.7 bn. Exports fell 4.1% year-over-year, a touch more than expected and follows a 1.8% decline in April. Imports were more surprising. They were off only 0.4%. The market had been looking for a 4% fall after dropping 10.9% in April.

There are at least two important takeaways from the Chinese trade figures. Imports have been contracting since October 2014. The 0.4% decline is the smallest in more than a year and a half. The news seems too good to believe. Consider that imports from Hong Kong reportedly increased by $2.48 bn. This is the most since 1999 and represents more than a 240% increase from a year ago. The suspicion is that this reflects over-invoicing to disguise capital exports.

“The other important takeaway is that China's steel exports rose 3.7% in May and in the first five months are running 6.4% above year ago levels.The US and EU are already taking action to deter a further surge of Chinese steel imports. China's surplus capacity is likely to be a source of tensions for years to come.”

A broker I know has rescheduled his July wedding to Long Island from the US Virgins because of fear of Zika. Many of the bride's friends are pregnant or trying to become pregnant.

More below on what all this means for our portfolio with news from Argentina, Australia, Canada, Colombia, Brazil, Britain, Hong Kong, Israel, Finland, France, Egypt, Poland, Ukraine, and Russia.

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Tue, 2016/06/07 - 12:43pm | Your editor

Llewellyn-Consulting.com sent a report on Russia. The author, Simon Commander, who worked many years at the World Bank and the European Bank for Reconstruction and Development, reviewed the state of the Russian economy and its institutions. He wrote that Putin's Russia is reminiscent of Suharto's Indonesia, which is why I headlined this newsletter Putindonesia:

"Russia’s economic prospects are looking increasingly grim. Last year’s plunging energy prices and international sanctions contributed to a 3.7% fall in GDP. Real wages plummeted by around 10%. The negative trend seems set to continue. In 2016, public spending on education and health care is slated to decline by 8%.

"The Kremlin’s desultory attempts at diversifying the Russian economy have largely failed. Labour productivity remains chronically low, and investment – foreign and domestic – has dried up. A turnaround is unlikely. Under current conditions, neither higher energy prices nor the lifting of sanctions would likely be enough to reinvigorate the country’s moribund economy.

"Over the past decade, President Putin’s regime has degraded the institutions that are essential to the functioning of a modern economy. Parts of the judicial system function badly. Above all, the ownership and governance of key assets and resources are almost all in state hands. The IMF calculated that in 2012 the consolidated public sector accounted for nearly 70% of Russia’s GDP. In the early 2000s this share was around 30-40%.

"This expansion of the state’s control of the Russian economy has been driven by a proliferation of state-owned corporations. Major firms in the energy, infrastructure, banking, and armaments sectors have been nationalised. In 2014, publicly-owned or controlled entities accounted for nearly 70% of the turnover and 85% of employment among Russia’s top 15 companies. For the largest 100 companies, these shares were 54% and 68%, respectively. The consolidated public sector now accounts for one-third of total employment.

"Russia’s big state-owned corporations are, for the most part, controlled – with considerable lack of transparency – by management that has been appointed by President Putin personally. Many major corporate decisions are made during one-on-one meetings between Putin and a company CEO. Many mergers and acquisitions require the president’s personal approval.

"Lack of transparency is pervasive. Only a few state-owned companies file International Financial Reporting Standards (IFRS) accounts, and many have large numbers of subsidiaries, which can dilute benefits to shareholders, while offering opportunities for managers and other connected parties to enrich themselves. Russian Railways, for example, has more than 23,000 subsidiaries. Gazprom has more than 4,300.

"Lack of detailed information makes it difficult to document the state’s full asset portfolio, let alone to set up workable transparent oversight. The agency [for] managing state property (Rosimushchestvo) is unable to act as an effective controlling shareholder.

"Putin’s Russia is increasingly reminiscent of President Suharto’s Indonesia, an intricate system of crony capitalism without real property rights. Many close to Putin have acquired great fortunes through their connections to state companies. One route to personal enrichment is to appropriate financial flows of state companies. Another is to leverage connections to secure no-bid contracts, or to purchase state assets at under-valued prices.

"The size of the crony economy is hinted at in the Panama Papers but [this] is just the tip of the iceberg. In 2014 the net worth of those subject to sanctions by the US and EU was around $17 bn. One sanctioned bank along holds assets [of over] $11 bn.

"This system comes at considerable cost to the Russian economy, favouring rent-seeking at the expense of productivity growth. Experience suggests that large public sectors are associated with sub-par growth and the crowding out of investment in the private sector. Indeed, competieition has drastically diminished in may sectors.

"Putin's commitment to the system he has built is unwavering. Proposed measures to raise fiscal revenues—such as privatisation of minority shares in state-owned corporations—will be done in a way that favours his cronies.

"Putin remains very popular—for now. As the economy continues to crumble that could change, as Putin himself acknowledged when—in anticipation of troule—he creates a National Guard of 400,000 paramilitary forces under the command of his long-term bodyguard.

"It [is] hard to design any credible path for change that preserves the prerogatives of Putin and cronies. Compettion and expanding the private sector would undermine the wealth and power that Putin's associates enjoy, why Russia's economic troubles are likely to continue. Economic liberalisation is unlikely without political liberalisation."


Vivian notes that what both Russia and China need now is a Marxist critic of the status quo.


More for paid subscribers follows from Israel, Brazil, Canada, Pakistan, Argentina, Australia, The Netherlands, and Britain.

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Brexit vs Bremain

Mon, 2016/06/06 - 1:25pm | Your editor

The latest UK polls show a majority of Britons want to leave the European Union. The vote is June 23 and my husband insists of being in London to vote against what looks like the deluded majority. But the latest ICM and YouGov polls show that the “Brexit” side has a 4 to 5% lead over “Bremain” and his vote will hardly help matters. The only hope is that the latest polls show 8 to 9% of Britons still undecided.

It appears that the main reason for Britons opposing their links to Europe is immigration, ironically enough since Britishers are mainly gainers from foreign immigration. Moreover, the people the British want to keep out are those who do not look like them or pray like them, whose immigration status is controlled entirely by Britain already.

If Donald Trump becomes president, I will move to my husband's homeland myself. I am barely more favorable to the other big mouth with funny blond hair, Boris Johnson, a leader in the Leave campaign, despite his holding, like my husband, a Balliol MA. (Balliol is the most international Oxford undergraduate college and a favorite of ahem Rhodes scholars, as they were then called.)

The impact on markets, however, is almost as perverse as the reaction to Abenomics. The pound feel and major investors like State Street Global Advisors and Goldman Sachs were selling British and EU shares.

However, a sharp rise in the May UK Markit Purchasing Manager's Index showed service sector orders hit 53.5, vs 52.3 in April. (Any level above 50 shows increased economic growth.) It also beat consensus forecasts of 52.5. One result is that despite the institutional sells, London shares rose today. The theory is that the falling pound sterling will make it easier to sell stuff and above all services (which includes financed and banking.) One of our UK global holdings, after receiving a totally awful US court ruling this morning nonetheless is up 1.2% so far.

The main reason is that sterling is down against the dollar which is good for UK export business. Along with many other foreign currencies, the pound rose last Friday after US job creation numbers disappointed, on the assumption that the Fed would not raise interest rates later this month. Today on the referendum polls, sterling swooned. Meanwhile Asian currencies rose and their stock markets fell today with a few exceptions for our faves.

More for paid subscribers from Australia, Bermuda, Brazil, Britain, Canada, China, Colombia, Denmark, Finland,Germany, Hong Kong, Israel, the Netherlands Antilles, South Africa, and South Korea. I am holding my fire on the price of gold (because there are too many things going on at once).

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