India, Mongolia, Ethiopia, and other Africa Investing

Mon, 2014/05/19 - 12:28pm | Your editor

Today is a busy Monday what with more press scandales now affecting Libération in the wake of earlier ones at The New York Times and Le Monde. It is a change from the focus on Murdoch's right-leaning empire over The News of the World's hacking. These days the liberal press is the subject.

But surely a Jewish lady like Jill Abramson could not have had the a Times' logo tattooed on her back? Except when they are in a concentration camp without a choice, Jews do not get tattoos. Lucy Kellaway in today's Financial Times writes that Ms Abramson has a crimson H for Harvard and a black Gothic print T for The Times on her back. (The FT is not a journal of record. Today's issue says on page 1 that there is an article on page 2 about a controversial Mass Pope Francis plans to hold at the alleged site of the Last Supper—but the article isn't there.)


India is now being over-weighted by enthusiastic investors worldwide. We strike a few notes of caution for our paid subscribers below. My main concern is that the new masters in New Delhi keep the excellent central bank governor Raguram Rajan in place and not put one of their minions at the head of the CB, the Reserve Bank of India. He can assure global investors of a steady rupee and fighting inflation.


The multinational merger mania continues apace with a new higher Pfizer bid for Astra Zeneca of Britain, based in part of tax benefits to PFE, and AT&T shifting its global assets to better its chances with its bid for NexTV. From Mexico City, Eduardo Garcia writes in (now available also in English) that the T deal will hurt Mexican billionaire Carlos Slim because it will sell its stock in America Latina to win regulatory approval for buying NexTV which operates in Latin America.


We report on some smaller but significant moves in Brazil, Israel, Ethiopia and Egypt for our paid subscribers, along with goodies from other exotic places in Africa, India, Mongolia, and Russia. Plus a report on a company looking good which could do even better. Plus another hoard of news from our risky but fun holdings on the London Alternative Investment Market (AIM) along with small caps from Canada and news from Holland, Brazil, Singapore, Britain and Finland.

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Portfolio Updates Posted

Sun, 2014/05/18 - 12:21pm | Your editor

 Greeting trekkies. The latest tables have been posted on our website. Everyone can look at the closed positions which show how well we are doing, but only paid subscribers get to see our current holdings and recommendations.

 As the man who invented emerging markets funds back when this newsletter started has decided that growth has moved back to the developed world, mostly to the USA, I will stick to my guns. Antoine Van Agtmael, then with private sector arm of the World Bank, the International Finance Corp., sponsor of the first specialized "less developed countries fund", in ~1982 coined the term "emerging markets".

 The first EM funds came from Morgan Stanley and invested in stocks. Now according to John Arthers in the weekend Financial Times, Mr. Van Agtmael thinks the USA is now more competitive than the Third World. Van Agtmael cites "creative response" like robotics, 3D printing and other manufacturing breakthroughs as moving production back to the West. He calls this the growth of the "Brain Belt' in place of the "Rust Belt". That mostly is about the US industrial heartland.

 Frankly, I am not convinced. We do not recommend positions in the USA, where most of the creativity is allegedly taking place. But I doubt that the time to switch has come. And while the world has been treated to the spectacle of political risk (in Ukraine, Thailand, and now Vietnam) I am sufficiently wary of political risk in the USA to not put all my money in the country run from Washington DC, where Mr. Van Agtmael hangs out.

 I suspect Mr. Van Agtmael is fed up with slicing and dicing of EMFs into BRICS and CIVETS etc. This is not only macro-economic forecasting but rigor.

 Next week's portfolio updates will be done on Monday (Memorial Day), a day late. And because I am travelling over the last week in May to my old college (for a gathering and  to cheer on my Machutanet on her 50th reunion at Radcliffe) the updates will be late the following week. Machutanet is Yiddish and Hebrew for my son- or daughter-in-law's mother, which I cannot say in English. We tried Comadre but that also is wrong. The male version is Machutin. The plural is Machutunim unless the in-law's parents are both mothers (a lesbian couple) in which case it is Machutunot.

 Hebrew/Yiddish is not the only language with better family ID than English. I like the Scandinavians with their Mods Mod and Vads Mod and Mods Vad and Vads Vad, which spells out how the grandparents stack up. Still to come are ways to describe the second husband of grandma and other modern variations.

 More for the paid subscriber gang follows:

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The Gurus Are Coming!

Fri, 2014/05/16 - 1:13pm | Your editor

This is the day after hedge funds tell the regulators about the changes they have made in their holdings, under new regulations. So those retail investors wanting to mirror their tactics are active in today's market, selling what the gurus have sold and buying what they bought.

Copycat investors may not get the same prices as their mentors of course, particularly not in some narrowly traded stocks where being late is costly. The idea is to avoid the old 20+2 charges that the big hedge funds impose in their investors: a 2% fee and a fifth of the profits generated. In practice, rumor has it, many hedge funds offer (shhh) discounts from those levels, but the minimum is still beyond the ability of most retail investors to come up with.

If you want a stock picker without owning a fortune you might think about me. We are in a niche market, global investing, where there aren't many US big players active. I don't trade for my own account until my blog has gone out. So you are even with me, upward, and (sometimes) downward.


I am not a guru, by the way. According to our stringer in India, Abhimanyu Singh Sisodia, I am a “gurette”. As the relative of a bunch of British raj relics I am also congenitally skeptical about the Narendra Modi victory because I like my curries secular. Also I am proud that I had the sense to sell the ADRs of Dr Reddy's Labs, RDY, despite the likely election results and the general hoopla about generic drugmakers. I overruled both our biotech maven and our local reporter. RDY is now barely over $40 per share, 10% below our profitable trade level which produced gains of over 70%. If you want the details, look at our closed positions table, which is published for all to see.


More for paid subscribers including quarterly reports from Brazil, Switzerland and Canada plus news from Britain, Ireland, Mexico, Brazil, Japan, Spain, and Finland.

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Thu, 2014/05/15 - 4:13pm | Your editor

I worried  unnecessarily about the inaccessibility of the website this morning. In fact it performed normally in the end. Remember that if you don't get your normal emailed blog you can always visit the site and read what has been posted there.

Now there is important news for paid subscribers.

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Tech Outage

Thu, 2014/05/15 - 12:40pm | Your editor

We are having a technical outage on our site which has kept the newsletter from being distributed by e-mail. Please visit and sign in with your password to read the Thursday issue before it becomes history. Thanks for your understanding. If you are a paid subscriber you can read the whole thing; if you are a pre-subscriber you get all but the stock advice.

Best wishes


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More from Our Man in Japan

Thu, 2014/05/15 - 12:18pm | Your editor

Yesterday was a bad day for women journalists. First Le Monde fired its senior editor, Natalie Nougayrède and The New York Times fired its executive editor Jill Abramson.

The NYT is a recidivist since a couple of years ago its publisher Arthur Sulzberger jr fired its CEO, Janet Robinson, and replaced her with a somewhat tainted former BBC director-general, Mark Thompson.

This lady editor-publisher cannot be fired as she owns this newsletter.


That's just as well as I got quite a lot of flak from readers in faraway lands and the USA for running a negative article about Japan's economic outlook yesterday, from our correspondent there, Chris Loew. As is our usage, it was published without quotation marks, since he is our paid reporter. I ran it because it seemed to show a change in his view on Abenomics and Japanese growth. He know Japan well as a decades-long resident, with a Japanese wife, a Japanese apartment and mortgage, and a Japanese dog, plus two half-Japanese children who keep him alert to hot trends. I know nothing about Japan myself.

Today it was reported that Japanese Q1 growth figures surged to 5.9% annualized, vs 0.3% in the last quarter of 2013. Q1 GNP also beat consensus forecasts of 4.2%.

The boost came from a Japanese shopping spree ahead of a rise in the sales tax April 1, to 8% from 5%. So the boom in consumption was a one-off.

The 4.9% rise in Q1 corporate capital expenditure also reported today may not herald better growth ahead, as Chris attributes it to companies spending money to replace Windows XP which Microsoft dropped. Here is more comment from Chris, our expert. He notes that Japan's trade balance fell to minus yen 10.86 trillion (~$10.9 bn) to replace shut-in nuclear power stations with imports while losing its electronics export edge to China and South Korea. His comments on specific stocks are below for paid subscribers.

Meanwhile Japanese stocks fell despite the seemingly good quarterly GDP growth supporting skeptical Chris.

More from Japan, Canada, Israel, Denmark, Norway, Belgium, The Netherlands, Britain, and Switzerland, including a company report.

Our Japan Correspondent Writes

Wed, 2014/05/14 - 12:39pm | Your editor

Chris Loew, our local reporter, writes on the contradictions of current Japanese economic policy:

I actually see the effect of Abenomics on inflation and taxes in my bankbook. I agree with a recent report by the OECD which cut its projections for 2014 Japanese economic growth, writing: “While the recent pick-up in inflation is encouraging, it could undermine recovery unless accompanied by a matching rise in wages.” Consumer prices are rising while wages are not. And sales tax applied to services, contract worker wages, and B2B sales are taking a bite out of everyone's pocketbook.

Japanese companies with substantial foreign earnings make more yen, so they look good. But most Japanese companies rely on imported foreign inputs and are hurting because of the weak yen. Sales are up on increased exports, but profits are flat since higher material costs cannot wholly be passed on to consumers.

PM Abe's structural reforms like special economic zones which would create a patchwork of tax-free enclaves, are not a panacea. Such SEZs would hurt the rest of Japan while favoring certain areas. Reducing corporate taxation, meanwhile, is at cross purposes with the official goal of a balanced budget. Moreover Japanese multinational corporations already minimize their taxes using transfer pricing.

I am negative about Abenomics and the current Japanese economy.


More for paid subscribers follows from Japan, of course, and also Canada, India, Russia, Britain, Hong Kong, Denmark, Japan, Israel, Brazil, Jordan, Australia, and South Africa, including three quarterly reports, all good for a change.

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Tue, 2014/05/13 - 1:55pm | Your editor

Today there is NAFTA news.

In his obit of Mexican entrepreneur Lorenzo Zambrano today, Eduardo Garcia comments that but for Cemex's dominant role in Mexico, the late Señor Zambrano would not have been able to borrow to the hilt on the short-term market to make a fatal purchase of Rinker at the worst possible time, right before the global financial crisis. Unlike the arguments of Benjamin Graham having a "moat" around your business can hurt a company, especially in a small oligarchic market. Señor Zambrano, 70, who died in Madrid yesterday, spent the intervening years since the perilous takeover of Rinker trying desperately to reestablish CX's balance sheet. A bachelor with no heirs in his family and no real successor at Cemex, he leaves a void. (Eduardo Garcia writes, a daily financial blog, now available in English as well as Spanish.)


Canada stocks may become easier to trade and track from the USA under a new OTC Markets Group offering covering OTC Canadians. The US OTC now allows non-SEC regulated companies trading outside the USA, including in Toronto, to let their shares trade in the US second-tier OTCQB venture capital market. It is a superior trading site to the pink sheets where currently the majority of Canadian small caps trade.

Under the new site rules, OTCMG will require that the company's CEO or CFO certify the results reported for accuracy and give other information about major shareholders, who is on the board, and their investor and public relations firms. This is an attempt to clean up some problems with OTC-traded Canada shares.

The OTCMG system will require that the minimum bid price of a share traded has to be at least one US cent, to avoid dilutive stock schemes and fraudulent promotions. It sounds to me like a low hurdle. What difference would a penny make? More helpful might be the requirement that a fee of $10,000 be paid annually along with an initial $2500 application fee. Current OTCQB companies can pay $7500/yr for the first 2 years and the application fee is waived.

Other potential OTCQB venture traded stocks could come from the London Alternative Investment Market where my newsletter has several share ideas. The enforcer of the new rules is still up in the air with the OTC MG trying to head off a regulatory role over foreign brokerages by the US Financial Regulatory Authority, or FINRA.



Today's blog is very late because of a conference call and then an internet outage.


Bad news today from Britain and Japan, mixed news from Ireland and Israel, and good news from India and Spain plus a company report and other news from Canada.

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Names Don't Matter and Trade News

Mon, 2014/05/12 - 11:30am | Your editor

Names matter less than you think The winner of the Eurovision song contest in Copenhagen yesterday was Austria's Conchita Wurst, a bearded male drag queen, who sang “Rise like a phoenix” to bug (among others) homophobic Vladimir Putin.

Nationalist pol Vladimir Zhirinovsky told Russian State TV: “It's the end of Europe. Fifty years ago the Soviet Army occupied Austria. We made a mistake in freeing Austria. We should have stayed.” Actually the Russian Copenhagen contest judges also voted for alto-soprano Conchita, a 25-yr-old Austrian cross-dresser born Thomas Neuwirth. Neuwirth says Conchita is a bearded Colombian lady and the singer gets not just the gay, lesbian, transgender, and bisexual vote but also that of people who like a joke.

You don't want to be tagged with a name giving luck or blessing.

Yingluck Shinawatra has been deposed as prime minister in Thailand and banned from politics. Goodluck Jonathan is under extreme political pressure for his government's failure to respond vigorously to the kidnapping by Boko Haram Muslim extremists of students at girl's high school in Nigeria's northeast province.

Having a blessing (Barak in Hebrew or Arabic) in your name doesn't do much good either. Israeli ex-defense minister Ehud Barak failed to get a peace deal with Yassir Arafat at Camp David in 2000 during the Clinton Administration. Hosni Mubarak in Egypt at 86 was tried for murder and has seen his party banned from the presidential coming election. Barack Obama has low approval ratings despite having won a 2nd term and may not go down in history as a great president despite his Nobel.

I haven't found any examples of people bearing bad luck or cursed names doing better.

More for paid subscribers follows from Israel, Singapore, China, Australia, Brazil, Britain, Spain, Canada, Germany, Japan, and Ireland.

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Mother's Day, Referendums, and Updated Tables

Sun, 2014/05/11 - 12:25pm | Your editor

Your editor spotted something grim in the Ukrainian ballotting by careful BBC-watching. The ballots being delivered to the few polling places that were open in Donetsk seem to have been pre-marked. They showed an X on the words  "tak" and  "da", yes in Ukrainian and Russian respectively. The idea was probably to show that even Ukrainian speakers support breaking away.

It is similar to the game Putin probably played in Crimea where ballots may also have been stuffed to achieve Soviet era-style unanimity (96.7%). And the one his minions may also be planning with a referendum in Transdniestria, west of Ukraine, a breakaway part of Moldova. Moldova seized boxes of ballots from a Russian jet in Chisinau, it is not clear from whom. There is no large airport in the breakaway area.

Have yoy been wondering why the North Atlantic Treaty Organization still exists 48 years after French President Charles de Gaulle withdrew from the integrated alliance's military command intended to block Russian expansionism? He argued that it was a tool for the US to dominate Europe.

Now you know why he was wrong and why we still need NATO. Five years ago, French Pres. Nicolas Sarkozy took France back into NATO.

Happy Mother's Day to all in North America if not in the North Atlantic. When I lived in France when it was still outside NATO it was always difficult to remember to send my mother good wishes on the right day--because while mothers are honored in France and Britain too, the Mother's Day dates are different.

I got good wishes for the day from 2 offspring and 4 grandchildren. Claude is in Israel and not able to phone.

And of course I did the table updates. These can be found at where pre-subscribers can view still more closed positions this week. And paid subscribers can view our current stock and bond; and tradeable (closed-end and exchange-traded) funds portfolios which are doing nicely.

More on the details for the paid contingent below:

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