Money Printing

Wed, 2016/07/13 - 7:40am | Your editor

The powers of global finance are back to printing money—and no, this does not mean you should buy the shares of De la Rue, the Basingstoke (England) security printer of banknotes. Central banks do not actually use a printing press to print money. What they do is make it easier for banks to supply credit more quickly to borrowers or potential ones: the needy, the desperate, and even the self-sufficient.

Writing in Asia Times, Dion Rabouin explains the Japanese easing after Shinzo Abe used his Senate victory to issue a call for more stimulus:

“Statements by ruling party sources that the stimulus could reach 10 trillion yen ($97.5 bn) helped Japan’s Nikkei stock index jump 4 % and sent the dollar soaring against the Japanese currency. The Bank of Japan is expected to provide additional easing to keep interest rates low and the yen weak to make sure stimulus spending can gain traction.

“'It now looks like there’s coordinated fiscal and monetary policy,' said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. 'If you get a fiscal policy that is expansive … the natural thing is to finance that with money-printing.'” (BMO stands for Bank of Montreal, one of the big 5 Canadian banks.)


The European Union countries have asked the Bank for International Settlements, based in Basel, Switzerland, to ease regulations setting standards for the liquidity and leverage of banks under rules set by the Basel Committee on Banking Supervision. Jonathan Hill, the former EU head of banking and finance (who resigned after the Brexit vote) warned that the regulators were moving toward “the stability of the graveyard” with their concerns about bank solvency. “Be brave enough not to regulate”, he added warning of the impact of rules on trade finance and market liquidity.

And with the impact of the British exit still to hit the European countries, his point has now been taken up by Brussels bank regulator successors.


Germany has now taken to charging negative interest on its newest bonds. It is cheaper for Germans to hide their money under the mattress than to invest in fixed income. This will not help Deutsche Bank. the sick man of Europe.


Britain itself has abandoned its austerity budget and the Bank of England (its central bank) has plans to imminently also cut interest rates.


Next week, the Bank of China (a private bank in Hong Kong) will issue $3 bn in BRICS bonds to Chinese buyers, to cover capital spending in Brazil, Russia, India, China itself, and South Africa. This also will boost spending. And the part of the BRICS loans going to China may wind up bailing out its own bankrupt state sector firms. Chinese credit growth is continuing to finance its zombie state firms even as defaults have risen by over 26% from the level of all of 2015 year to date.


China needs a boost. The latest figures in US$ show exports off 4.8% from last year while imports (often of intermediate supplies and raw materials) are off even more dramatically, down 8.4%.


Meanwhile US interest rates have fallen sharply in the last year, because of delay in the expected interventions by our Federal Reserve, also a form of money-printing (or of failing to limit it.) The market now expects one further US interest rate rise this year—if that. Fiscal policy is on hold in the US because it is an election year, so we are spared tax increases.


What all this means for our portfolio will be discussed below. Meanwhile, for whatever it is worth, our return to Britain from EU country Portugal turns out to have been less disastrous than expected, as our conversion to sterling was at a much higher rate. In fact, while the Wall Street Journal today headlined that “Investors Bet Sterling's Slide Isn't Over” after the British currency lost 12% after the vote to leave the EU, the local papers are much more bullish on their money.

Yesterday, sterling his $1.3262 on the Theresa May takeover from David Cameron, up smartly from the $1.28 and change it fell to earlier this month. The upward move of the pound over the past few days means the chatter is bout sterling next testing the $1.40 level again and then maybe rising even higher.


Having the strongest currency in the neighborhood is not enough to make America great again. In fact it spells trouble for our country's companies and employment. But if the BMO expert Greg Anderson is right that central banks are coordinating their money-printing efforts, the US is acting as the ballast by keeping interest rates relatively high against those offered elsewhere. To meet its employment and inflation goals, the Fed must be patient over raising interest rates, according to Minneapolis Fed Prexy Neel Kashkari.


More for paid subscribers from Canada, Mexico, Finland, Britain, Israel, Spain, Denmark, Ireland, Colombia, the Dutch Antilles, and The Philippines, but nothing to do with South China Sea boundaries. Today's blog is a double version as I didn't file yesterday because I was flying back to London.


[My maiden name was Oppenheim, and the UN Law of the Sea rules sanctioning China were based on the international law studies by Lassa F.L. Oppenheim, a distant relative from the Hessian Jewish community from which my parents sprang. Prof. Oppenheim invented international law after he moved to Britain in 1895 aged 42. His work was influential for the League of Nations, the UN, the World Court, and the Permanent Court of Arbitration in The Hague, which ruled in favor of Manila.]

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Portugal Wins Football, Loses Investors

Mon, 2016/07/11 - 4:36am | Your editor


It took 49 minutes of overtime, but Portugal is now the football (soccer) champion of Europe despite its best-known senior player, Ronaldo, having been sidelined earlier by an injury. Its 1-0 victory over France was celebrated by a long noisy night. Soccer wins have no impact on investing. As a subscriber based in neighboring Spain (eliminated ages ago) wrote this morning:


“Portugal is not a trustworthy place to invest, lacking appropriate corporate supervision and regulation despite supposed EU safeguards. Any country where investors in the telephone company or similar utility risk losing their entire investment -- not just lower dividends or occasional stock losses--because of unprosecuted trickery or plain fraud is no a place for anyone to put his money.” He was referring to the way the Portuguese Espirito Santo banking family managed to use offshore holding companies and regulatory loopholes to loot Portugal Telecom and Oi in Brazil, both of which had NYSE-listed American Depositary Receipts."


As forecast Sunday, the Japanese version of WhatsApp, called Line. whose IPO is today, was priced at the high end of the prospectus range, because the world is so hungry for tech newbies. Along with the government party winning the Senate elections Sunday (rare in a period when voters go rogue) this also boosted Tokyo stocks by 4% today, good for your editor who plans to sell when she returns home.


My husband belongs to the family which founded the John Lewis department store in 1864 and then gave it away to its employees starting after the Great Crash in 1929 under the founder's son, John Spedan Lewis. Here from Reuters is what the Brexit vote and the tumbling pound means for business at the largest British department store chain and supermarket chain:


"Genuinely it is a big issue for us to face into next year," Managing Director Andy Street told reporters at a media dinner. John Lewis imports about two-thirds of the goods it sells and a third is paid for with dollars.

Street said the firm is fully hedged for its 2016-7 financial year. It has "a good proportion" of hedging for the first half of its 2017-18 year but "a lot less" for the second half. "It can never be simple because you don't know where cost inflation comes through from other things that are imported, perhaps one stage away from direct importing," he noted.

With Britain now in its worst political crisis since 1929, investors worry that the economy could fall into recession without stimulus measures and tax cuts. This would hurt consumer confidence and threaten corporate earnings. "At the moment this is a political crisis, it's not an economic crisis. But one could turn into the other if not properly handled," said Street. He added that the John Lewis group had not changed any investment plans post the Brexit vote.

John Lewis last Tuesday reported slower sales growth in the week to July 2 --which followed Britain's vote to leave the EU. However, the data also reflected an earlier start to its summer sales and bad weather. Street added John Lewis' worker co-ownership model, often lauded by ex-Prime Minister David Cameron, would stand it in good stead in another economic downturn.Thanks to reader Maurice F for sending me a summary of Street's remarks from The Telegraph, another British source.

Today we have a bulletin from Farnborough where the world aviation industry jamboree is being held, plus news of our drug and energy companies. There will be no blog Tuesday when I will be flying back to Blighty. We have news from Egypt, Israel, Hong Kong, Spain, India, Canada, Britain, Brazil, Ireland, Finland, Colombia, The Dutch Antilles, and Germany today.

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Sunday Is Beach Day

Sun, 2016/07/10 - 10:19am | Your editor


Serena Williams beat Angelique Kerber 7-5, 6-3 in yesterday’s Wimbledon final, her 22nd major title. Now Williams has tied with Steffi Graf for most wins in women's tennis matches. Williams has made much more money than Graf, although not as much until recently as male players.


Williams' prize now converts into under $2.59 mn, about $380,000 less it would have been in dollars before the UK vote to leave the European Union. While she began life as a German, Graf also is now a US resident, in Las Vegas. Graf's winnings have also been nipped by forex changes and by her heavy charitable commitments for educating mostly African children rescued from war zones.


Serena's triumph is hers to enjoy but awful US racial strife over the past few days has undercut it. As a pious Jehovah's Witness, Williams is rigorously a-political. Witnesses do not lobby, nor vote for political parties or candidates, nor run for office, nor participate in any move to change governments. I think helping child victims of war (like Graf does) is allowed but am not sure.


As I cannot access my brokerage account from Portugal, where I remain till Tuesday, there will be no performance tables this weekend. I got a first-ever Turkish-born pre-subscriber who also spoke at the investing conference last week. He is not very exotic, with a UK Doctorate, excellent English, and an address in Manchester, England. Moreover he and I spoke over a glass of wine, despite his being a Muslim.


I informally polled the 100-odd conference attendees about whether they would let this man get a US visa. They unanimously voted 'yes'. This may seem to bode ill for the Trump campaign but after the surprise Brexit vote I'm wary of poll predictions.


Yesterday my husband who signed a petition for Britishers calling for the country to hold another referendum before leaving the EU was sent a formal parliamentary notification telling him he didn't have a right to a re-vote. About 3 million Britons signed the petition, also including my sister-in-law. As a US citizen I could not add my 'John Hancock'.


It looks like PM Shinzo Abe and Abenomic policies won a landslide in the polling for the upper house in Japan, probably good for the global economy and a welcome change from the British and Euro-land taste for unconventional populist parties.


This may help the Tokyo Stock Exchange. This coming week the Japanese messaging app Line plans a NYSE-Tokyo IPO, expected to raise up to $1.4 bn (including the underwriters' over-allotment).

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Redback Devaluation Tricks

Fri, 2016/07/08 - 7:53am | Your editor

The first survey of UK post-Brexit consumer confidence, a proxy for the overall economic outlook, registered its biggest drop since Dec. 1994. A special post-referendum GfK Consumer Confidence Barometer in the first week of July came in at minus 9, off 8 points from the earlier minus 1. It will probably knock sterling back further, as it is already under pressure because of concerns over future trade status with the European Union, foreign investors exiting London's financial center if it loses its “passporting rights” in Euro markets, and worries about the British Treasury plans to prop up the UK economy by the Osborne tax cuts boosting deficit spending and maybe future money-printing.


June US employment figures recovered from weak May numbers. A Wall St Journal survey forecast that 162,000 new jobs were created in June, and any shortfall would set markets back.IAs  the number is higher because May suffered a Verizon strike, markets will got a boost. The non-farm payroll growth number  out at 8:30 am EST. U.S. economy added a greater-than-expected 287,000 jobs in June and Wall Street premarket prices soared. But the surging US dollar will weigh on US growth and employment as imports rise and exports fall in future months.

US markets will be in shock today over the murder of 5 cops in Texas which I hope aren't linked to Black Lives Matter protests. And the latest wrinkle in Tobin tax plans finds a proposal to penalize high frequency traders, however defined, in the draft Democratic Party platform. About the only EU excess your editor felt deserved Brexit was the EU's proposed financial transaction tax.

Meanwhile the brokerage community is trying to forestall a more welcome change to pension sales by removing the Democrats' plank to require that advisors put their customers' interests above those of the broker, via a fiduciary rule.

The full impact of the global crises discussed below will not hit stocks until Q3 but Q2 will probably include plenty of bad news. Let's start with China.

The Daily Telegraph, a British newspaper, broke a big currency story today: China has been systematically depreciating its yuan (or renminbi) currency, in the wake of the UK vote to leave the EU. Moreover the great Chinese currency devaluation is continueing.

While China in past periods of global economic turmoil supported currency stability, this time it is pushing the Redback down against our Greenback. Post-Brexit market volatility has further accelerated Chinese devaluation against its reference basket. The Telegraph writes: “China abandoned a solemn pledge to keep its exchange rate stable, sending a powerful deflationary impulse through a global economy already caught in a 1930s trap.”

Year- to-date the Chinese yuan has dropped at an annualized rate of 12%, and since the Brexit vote the depreciation has been faster, “suggesting that the People’s Bank [of China, PBOC, is] taking advantage of the distraction to push through a sharper devaluation.” It adds:

“Factory gate prices within China are falling at a rate of 2.9%, further amplifying the deflationary impact. Beijing is engaged [in] an undeclared policy of 'beggar-my-neighbor' mercantilism, trying to avert an industrial crisis at home by exporting its overcapacity in steel, shipbuilding, chemicals, plastics, paper, glass, and even solar panels, to the world.

“'This makes a mockery of the PBOC’s suggestion that its policy is to keep the currency’s value stable,' said Mark Williams, chief China economist at Capital Economics. Mr Williams said it is unclear whether Beijing intended to deceive investors all along when it gave categorical assurances earlier this year, or whether it is feeding on events.

“'Either way the markets have stopped believing what they are told, storing serious trouble for the authorities should there be another surge in capital flight later this year, as [is] widely expected. 'When it comes, the PBOC will find itself sorely lacking in credibility. It may have to intervene on a large scale to maintain control,' he said.”

China drained more liquidity from the market as 790 bn yuan worth of reverse repos matured this week and the PBOLC renewed only 175 bn yuan in new reverse repos, pulling 615 bn yuan out of the market

Chinese capital flight is one of the few props for the real estate market here in Portugal, which will give European passports to those investing euros 500,000 in a home or euros 1 mn in a business,. But that may come to an end.

Portugal, Britain's oldest ally on the European mainland,is suffering from the attempt by Brussels bureaucrats to control the government budget. EU officials objecting to Lisbon a 0.2% excess in its budget deficit against 2015 gross domestic product may not in the end issue fines and cut benefits—but they are threatening to. The Finance Ministers of the EU countries, including Britain's, will have to vote on what sanctions to impose because Portugal's budget deficit further pressures the Euro's stability.

The link between Portugal and Britain is ancient. A participant at the conference I spoke at reminded me that this alliance started back in 1147, when Britons returning from the Second Crusade helped King Alfonso I recapture Lisbon from the Moors. The Royals of the two countries married each other and England got control of Oman, Bombay, and Capetown via the dowry of Portuguese royal brides.

Until World War II, when Portugal was neutral, the two countries were allies in every European conflict, except during the 16th century when Spain having conquered Portugal, sent an Armada to try to also conquer England.

Portugal faces France today in the finals of the European soccer cup. It beat Wales and Germany earlier this week. If only economics depended on good tactical kicking.

The planned departure of Portugal's chief big buddy from the EU, and the row over whether Lisbon has the right to determine its own government budget, means some Portuguese academic economists are talking about “Por-exit”. This may get Brussels to accept the modest extra deficit rather than risking it.

EPFR reported that money exited from Euroland stock funds post-Brexit but flowed into both gold funds (expected) and (”less predictably”) into emerging market funds. The Chicago Merc Exchange has just raised performance bond margins on gold contracts by 60% making it more expensive for speculators to maintain positions.


More today from Britain, Spain, India, Canada, Brazil, Jordan, Ireland, Colombia, and Germany. There will be no tables Sunday.

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A Bad Day

Thu, 2016/07/07 - 7:38am | Your editor

The next European Union country in crisis will be Italy, despite its being in the very heart of the Eurozone, because of its banking crisis, dating back to the global financial crisis of 2007-8. Italian banks hold as much was euros 350 bn in non-performing bad debt worth about 17% of Italian gross domestic product.

The worst of bank is Monte dei Paschi of Siena which has already been bailed out twice. Year to date, Italian banks have lost have their stock market valuation over concern about what lurks in their loan book.

The problem with doing it again is that what the Brexit supports call “the 4th Reich”--Germany--doesn't want there to be a rescue for fear that it will undermine the whole banking system in the currency bloc. Derivatives on the books of other Euroland banks are a hundred times more risky than Italy's non-performing loan issues, according to Prime Minister Matteo Renzi The German national champion, Deutsche Bank, while in better shape than the Italian bancos and bancas, is also in deep trouble. Its stock price hit a historic low yesterday along with the Euro Stoxx Bank Index.

France, having abandoned an attempt to impose a 75% tax rate on high earners, now is trying to lure global banks away from a London base across the Atlantic to Paris. Sure the food is better, but the threat of horrible regulations and confiscatory taxes means the bankers will hesitate to pick Paris over Frankfurt, Zurich, Dublin, or wherever. JP Morgan Chase is one of the banks thinking about cutting back London staff if they are not allowed to operate in euroland.

The Italian head of Société Générale of France, Lorenzo Bini Smigi, appeared on TV yesterday to warn that the problems of Italian banking could easily spread to France and Italy must be allowed to inject government money into its banks, despite German objections.

British banks have not been spared. While Barclays fell only 3.1% yesterday, other state-controlled banks whose privatization has been delayed are down over 6%. Today's Financial Times worked out that about half the £25 bn invested in commercial property via funds by retail investors is now lock down after redemptions were suspended. In the last day the rout spread to foreign companies including Canada Life's small real estate fund.

Adding fuel to the fire, the European Union banking commissioner (who replaced the Briton who was forced to step down after the referendum) has now stated that the EU will not adopt the new higher global capital requirements for banks set by the Basel agreement because “it unduly favors American banks over European ones.” So all EU banks are now under pressure.

While most Latin-derived words have a single gender, for some reason banks can be either masculine or feminine. This is a big confusing. Italian banks can be male, banco, while French ones are feminine, banque. However, French banks often have names leaving out the word bank entirely, a relic of St. Thomas Aquinas, who disapproved of “filthy lucre” AKA interest.

Gold is at a 28-month high and according to UBS and ABN en route to over $1400/oz. They are Swiss and Dutch banks. Meanwhile the pound sterling has fallen to $1.298 and banks are predicting a further fall of 7 to 11% is coming, although for now it is stable. Goldman and Citi see a bottom around $1.20, and Deutsche at $1.15 by year-end.
The euro is at $1.107, also looking poorly. This will not make America great again. Our greenback is up 3.5% post-Brexit. If the dollar is too high it will hurt US exports and encourage US imports. It will also hurt employment levels.

Suffering the same fate is the yen, the other haven currency now. Chinese exports are under a cloud because Singapore has demanded that China repair its newly delivered high-speed railway equipment which failed safety tests. The Australian dollar may not survive as a winner if the country loses its triple-A rating.

What this means to our portfolio is discussed below along with news about banks and companies in other sectors. We have news from India, Israel, Britain, Canada, Denmark, Hong Kong, Australia, Holland, and South Africa. The news is mostly bad. Read more »

Poor Portugal

Wed, 2016/07/06 - 11:51am | Your editor

No sooner do I get somewhere in the European Union then a crisis develops. I arrived last night in Portugal to participate in an investor conference and by this morning the Brussels bureaucrats were busily interfering with the country's sovereignty over its budget deficit which violates EU rules. A country's budget may not exceed 4.2% of gross national product. Portugal hit a level of 4.4% last year. The real target for overspending is nearby Spain where the deficit was 5.9% of GDP, , but because the country lacks a government despite two rounds of elections, the Eurocrats don't dare take on Madrid—yet.

Lisbon is easier too bully and the chief tax policy honcho now says the EU will “adopt necessary measures very soon.” Pushing Portugal around helps make others “respect budget rules.”
If censured, Lisbon will have 20 days to change its budget to avoid monetary penalties which would include fines and a ban on payment of some EU regional benefits. Now I have some sympathy for Brexit referendum voters who opted to leave the EU rather than put up with an elected government being overruled by inflexible budget bosses.

The government here says the country is being punished for past failures to observe the deficit limits, set to protect the common currency, the euro, from losing value in global trading. The 2016 Portuguese budget, by the way, projects a 4.2% budget deficit, meeting the Brussels criteria.

But of course some of that depends on growth of the Portuguese GDP which may be nipped by the impact of Brexit. Britain's oldest Eurozone ally is Portugal and its population famously loves the country's beaches and golf courses. With sterling losing altitude, some of those tourists will not come here.

Apart from government-less Spain, which cannot be fined because there is nobody responsible for its budget, other countries are also under threat, like Italy, which however is too big and old an EU member to be pushed around like Portugal. Italian banks need a bailout from the Roman government which will cause a boosted budget deficit.


Also suffering from Britain's “wrong vote”, Canada will not get Brussels “fast-track approval” for its trade pact with the EU. Being a part of the Commonwealth, our neighbor to the north expected its trade pact to be pushed through by Britain. But now Britain has lost its clout in the EU. Instead of a fast-track, the treaty with Canada will now have to be ratified by all 38 EU national and regional representative bodies. The same probably will affect the US which has done a deal subject to ratification for Trans-Pacific Trade (including by the US Senate.)

For whatever it's worth, over the trade pact the EU is supporting Parliamentary rights over trade policy while over the budget process it is boosting bureaucratic interference with elected representatives.


Meanwhile the UK's listed property investment vehicles are suspending redemptions because of price drops. This is an echo of the run-up to the global economic crisis in 2008 when US money market funds suspended redemptions because the net-asset value of these fund had fallen to under $1, breaking the buck.

The UK real estate investment funds which no longer can be cashed in now includes Henderson Value Fund; M&G Investments; Aviva Investment; and Standard Life. Real estate funds are supposed to invest for the longer term but they are sold as providing instant liquidity. We no longer invest this way after losing out with a fund from Holland, called Robeco, which had an American Depositary Receipt traded in the USA. None of the current blocked funds have ADRs.

The problem is that redemptions trigger more redemptions in open-end funds, because they are forced into badly-timed asset sales to pay people who want out. This cuts their net asset values and more people want to fexit (exit the fund, a term I just invented.)

With so much uncertainty about investing in the UK, the pound sterling fell overnight to $1.2796 before recovering once London opened today.

I think the sell-off is overdone. More for paid subscribers follows from Britain, Canada, Israel, India, Ireland, Vietnam, Mexico, Japan, and Texas.

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UK Tax Haven Proposal

Mon, 2016/07/04 - 7:26am | Your editor


Nigel Farage, head of the UK Independence Party has resigned. So has PM David Cameron, a Tory. The Labour leader Jeremy Cobyn grimly hangs on and so does Britain's Tory Chancellor of the Exchequer.

The latter, George Osborne, proposed a solution for the post-Brexit British economy—making it into a tax-haven. In a weekend interview published in today's Financial Times, the Tory who supported Britain remaining in the European Union revealed his goal of lowering the basic British corporate tax rate to below 15%. This to encourage companies to continue to invest in Britain as it prepares to leave the European Union.

The current UK corporate tax rate is 20% and it was slated to be lowered by 1% in each of the next two years. Now it will be cut faster, if Osborne has his way. That would make British corporate taxes the lowest offered by a large European country.

Speeding up the cuts, Osborne said, is necessary to make the EU exit work for Britain. It will require abandoning another part of the Tory program, balancing the budget to cut taxes. During the campaign, Osborne, supporting Bremain, warned that leaving the EU risked pushing Britain into a recession, something he now intends to forestall. However, it is unclear if the Chancellor himself will survive into the cabinet to replace that of David Cameron after Sept. when he is due to resign.

The reaction from foreign countries only just aware of Osborne's plans brass so far has been negative. If Britain engages in competitive tax-cutting, Brussels may make it harder for it to negotiate an exit without damage to its economy.

Pascal Lamy, a French bureaucrat who used to head the World Trade Organization, was one of the first to make a public comment, on the BBC:

“The UK is already activating one of the weapons in this negotiation, tax dumping, tax competition. I can understand why he [Mr Osborne] does that, because obviously investors are flowing out from the UK, and he wants to provide them with some sort of premium that would make them think twice before they leave the United Kingdom.

“He has to think about the impact of this on the Continent. This will be seen on the Continent as the start of the negotiation. And I'm quite convinced that at the end of the day, if you want a proper balanced win-win relationship in the future, starting with tax competition is not the right way psychologically to prepare this negotiation.”

Last Friday, German central bank chief Jens Weidmann said he would oppose fresh stimulus measures by the European Central Bank in the wake of the UK decision to leave the EU. European CB board member Benoît Coeuré yesterday said the ECB should delay further stimulus measures to see how Eurozone banks and businesses react to the British shock.. But taxes are another matter entirely.

Tax deals are part of economic planning by smaller EU countries. Ireland or Estonia offer companies (mostly American) very low tax bills with a 12.5% corporate tax rate; other member countries, including Luxembourg, Ireland, and the Netherlands, work out special deals for multinational companies to game the system by booking profits in their low-tax EU jurisdiction when they are generated in high-tax ones. But for a large country to get into tax competition would be a game-changer.


Post-Brexit, investors dumped global equities selling $3.3 bn worth the day after the poll, June 24, and another $5.6 bn the following Monday. Later last week some buying back occurred, but it totaled only about $1.6 bn. Investors switched their holdings to gold, which collected $1.38 bn of new money. And, amazingly, they put cash into emerging markets.


When the largest investors abroad return from their July 4th holiday tomorrow, the tax-cut appeal of the other big English-speaking country may boost UK stocks and funds. In Asian markets today, the prospect of new stimulus has boosted equities. Not just because of Britain, but also because a Bank of Japan survey of Japanese companies found that they expect inflation to fall over the next 5 years. If there is no further stimulus, via tax cuts, for example, Japanese companies will not have any reason to invest now for fear costs will rise in the next 5 years. Sterling is a horse of a different color. The pound is down -0.2% at $1.3254 and the euro is off n0.3% to $1.1105. Commodity currencies including the C$ are up.


There will be no blog tomorrow but I am making up for it by filing today despite Cousin Sandy's Birthday and Independence Day. More follows for paid subscribers below from Britain, Argentina, Australia, Israel, Ireland, China, Switzerland, and South Africa :

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Sunday Duty

Sun, 2016/07/03 - 2:13am | Your editor

From London, here are the model portfolio tables, with the latest trades incorporated. This is a tough job to do outside the USA but I have done it to cover June, which was an eventful month. Closed position tables may be viewed by everyone at but only paid subscribers get to see the latest advice. Note that to view spreadsheets, it helps to hit the printer-friendly button on the site even if you don't want to print.

More follows for paid subscribers:

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The Jewish Issue

Fri, 2016/07/01 - 8:46am | Your editor

After a hack attack on my website and an offer from a Gulf vendor to help my marketing, which probably are not related, here is a note about Jews in the UK.

The JC, formerly The Jewish Chronicle, a UK weekly, reports that British Jews have something in common with Scots, Londoners, and under-35's. A Survation poll the paper had done this week found that 59% of British Jews voted to remain in the EU; 31% only voted to exit; and 6% did not vote.

Not too surprisingly, a majority of UK Jews were unhappy about the outcome of the referendum. Moreover, 11% of the Jewish Brexit voters now regret their decision.

British Jews are among those backing Home Secy Theresa May for Prime Minister, in part because after the Paris terrorist attack on a Kosher supermarket last year, she carried a sign reading: “Je suis Juif” at a Jewish luncheon—winning for sentiment if not for correct French.

Jewish Britons are very much in focus today after the chaotic report on anti-Semitism yesterday by Labour Party leader Jeremy Corbyn. Jewish Labour MP Ruth Smeeth of Stoke North said she was attacked by a Corbynist “Momentum” leader with “traditional anti-Semitic slurs” about a “Jewish media conspiracy”. After Corbyn didn't respond, she fled in tears.

Then Corbyn conflated Jews with Muslim moderates, being “no more responsible for the actions of Israel or the Netanyahu government than our Muslim friends are for various self-styled Islamic states or organizations like Daesh”.

All this is marginal to the UK soap opera over party leaders. But if Britain runs into economic difficulties, there is a real threat of anti-Semitic reactions from the left.

Are all foreign Jews (like me and Ruth Smeeth) responsible for the right-wing Israeli government creating obstacles to a Middle East peace accord? No. Are other Muslims responsible for the terrorists in their midst? Yes, if they know about murder plans and don't stop them. This week's murder tally included nearly 100 dead in Turkey and Afghanistan, mostly Muslims.


Yesterday, a senior United Nations official at the Security Council quoted the long-awaited but still-unreleased report by the Middle East Quartet: it says that hopes for peace between Israel and the Palestinians were being severely undermined by three "negative trends". These, according to Nickolai Mladenov, are continuing violence, terrorism and incitement; Israeli settlement expansion in the West Bank; and a lack of control of the Gaza Strip by the Palestinian Authority.

Mladenov added that the Quartet (the UN, the European Union, the USA, and Russia – will probably release the report today. The last round Israeli-Palestinepeace talks ends in April 2014. Then Palestinians accused Israel of reneging on a deal to free prisoners, while Israel said it would not continue negotiations after the militant Islamist Hamas movement was brought into a Palestinian unity government.


More for paid subscribers today as I set out on a look for more post-Brexit bargains, or in Hebrew, metzioth. There will be a blog Monday despite the 4th of July but none Tuesday when I will be travelling to Portugal to attend an investor's conference and meet with our architect-general contractor about modernizing the Algarve house we have owned for 37 years. We have news from Britain, Ireland, Sweden, Brazil, Mexico, South Africa, South Korea, China, Japan, Spain, Canada, Tanzania, Kenya, and the USA.

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On 1984 and Now

Thu, 2016/06/30 - 7:21am | Your editor


Last night we went to a brilliant play we missed earlier, the adaptation of 1984 by Robert Icke and Duncan Macmillan now in London's The Playhouse under the arches of The Embankment. Inevitably, and a bit fatuously, the revival referenced recent events like the Edward Snowden revelations and how our internet and social media use leads to our lives being monitored.

For a pro writer like me, the key takeaway from the performance was the importance of language, with the hero employed in the Oceania Recdev to advance Newspeak, removing words from Oldspeak (aka English) to make it impossible to say or even think against dictatorial Party doctrine.

Snowdon is not a hero like Orwell's Winston Smith, in my view, among other reasons because his persecution is inefficient! Marketers are not Big Brother! Contemporary social media traps are easier to escape than 1984.

Take Facebook's decision to favor notes from those people “friended” over news or sales notes. This is intrusive and biased but it is hardly the thin edge for imposing dictatorship on us.

Asia was mixed today with Sydney, Tokyo, Hong Kong, Karachi, and Bombay all up, although Tokyo barely, and Shanghai down. In London trading today, the FTSE 100 is up over 0.53% while the smaller FTSE 250 is down fractionally. European markets are all buoyant. Johannesburg and São Paulo are down.

However, world stock markets are on the way to chalking up their worst performance since January for June according to Reuters. On the other hand, Dow-Jones's Marketwatch says today is the most bullish day of the year and calls some shares ready for a 98% rise in market price.


Two major bits of news for my US holdings, not in the Model Portfolios of course. Alcoa will split in two defying attempts by its Australian jv partner Alumina Ltd to block the spin off of the upstream assets. And GE Capital, having exited financial operations, is no longer on the US “too big to fail” list.

More for paid subscribers follows with news from Spain, Britain, Denmark, Canada, Mexico, Israel, India, Singapore, China, the Philippines, Brazil, Fin-, Hol-land, and Colombia.

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