BDRAF

Press, Trading, and ETF Scandals

Thu, 2015/10/01 - 1:19pm | Your editor

There is a certain irony in a British-owned publication going head to head with US authorities over the First Amendment. Under Ben Bernanke, the Federal Reserve initiated an insider-trading investigation into how its bond purchase stimulus plans were published by an outfit called Medley Global Advisors, owned by The Financial Times. Medley may be subject to prosecution in a NY Federal court. The Commodity Futures Trading Commission is investigating whether its institutional clients benefited from illegal (or careless) leaks by Fed staffers on the US central bank's planned monthly purchases of US Treasury bonds.

The Fed started an internal review of how information had gone to Medley (and The Wall Street Journal, which also revealed our CB's supposedly secret staff papers calling for more stimulus by buying T-bonds.)

Medley's lawyers rebuttal is that it is covered by the US Constitution amendment protecting freedom of the press. What makes this ironic is that the FT's homeland, Britain, lacks press freedom laws. Thus it is the venue of choice for international libel suits. These can bankrupt media companies with legal fees and damages.

Here the issue is whether Medley's client hedge funds, institutional investors, and asset managers were told something secret. If it had already been published by the WSJ, the clients buying a “policy research newsletter” paid high fees to learn what the WSJ daily had already exposed.

 

A new rogue trader was exposed at Nidera, a Rotterdam commodities firm controlled by grain-trader Cofco Corp of China, who ran up losses $200 million by fraudulent trades in green biofuel alternatives to oil. This is the month's second Dutch trade scandal after an options trader was nabbed at ING Bank for booking falsified trades. Because I am read in Europe I am not naming them for fear of libel suits.

 

Exchange-traded funds are under a cloud because their trading unlinked from the assets they own during the Aug. 24 panic. Now a solution offered by the BATS exchange, which will pay ETF issuers $400,000/yr for listing their products there. Until now, stocks (and ETFs) had to pay for listings. BATS now traded about 45% of listed ETFs and accounts for a bit over a quarter of their daily volume.

 

In another self-contradiction, Beijing will allow foreign central and commercial banks and sovereign wealth funds to freely trade on the domestic forex market, using spot, forward, and options to trade. This is the same country which intervenes regularly to fix the yuan (renminbi) exchange rate.

 

More for paid subscribers follows from Israel, Mexico, Canada, Italy, The Netherlands, France, Colombia, India, Australia, Spain, Switzerland, and Pasadena.

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Purple Thursday

Thu, 2015/01/15 - 2:03pm | Your editor

Today the big news is about money and oil. Forward crude oil rose 6% breaking the downtrend. The Swiss central bank (CB) ended its attempt to stop the franc from rising above 1.20 against the euro (to protect its export markets for chocolate, Swatches, and banking services.)

 

The unpegged Swiss franc then proceded to rise as much as 40% above the euro interday. The euro hit a record low. Swiss bond yields turned negative across the board, meaning you pay to hold Swissie paper rather than getting a return. For Swiss holders, gold fell by 23%. For others it boomed.

 

And, oh, the US dollar lost as much as 14% interday in London trading. The move makes it almost certain the the Mario Draghi ECB quantitative easing program will be launched Jan. 26, after yesterday's EU judiciary ruling against German objections. (Finland is still quarreling but nobody pays attention to Finns.)

 

Our advertiser, Adrian Ash of www.bullionvault.com called the news“violet Thursday” (after the color of the SwFr1000 note). He also called the currency upheaval “Soros in reverse.” In 1992, Hungarian-born American speculator George Soros bet around $1.5 bn that the pound sterling could not be kept aligned with the exchange rate mechanism of the Eurozone (the predecessor to the euro.) He bet it would fall because of weakness in the British economy and made a fortune as the Bank of England desperately defended sterling with ever-higher interest rates. But the market won, as it did again today against the Swissie. (Adrian writes about money. If you want to buy physical gold cheaply and legally, visit our site to click through to www.bullionvault.com/ Like the main US gold exchange-traded fund, it is sponsored by the World Gold Council, a miner grouping aiming to get more investors to buy gold. It is highly respectable with security and low trading margins, unlike other outfits in the precious metals arena. And it's British.)

 

A bit overwhelmed by the Swiss, Abhimanyu Sisodia reports:

The Indian CB surprised the markets yesterday with a 25 basis point cut in the repo rate at which it lends money to commercial banks. As a result banks have started lowering loan interest rates. The World Bank economists released a forecast for 2015 predicting that Indian growth will catch up with China's in 2016-7. Indian growth in the next fiscal year (starting April 1) is expected to hit 6.5%. The Sensex (stock market index) had its best single-day performance since May 2009. The rupee gained 46 paise (rupee cents) against the US$.

 

The richest Chinese investor of them all is Guo Guangchang who runs Fosun International, buyer of foreign assets. Fosun doesn't buy positions, but control of companies. Guo's alleged model is Warren Buffett.

Guo's recent purchases include Club Med, the French prepaid holiday camp operator; St John, a US fashion house for ladies who lunch; posh Italian menswear group Caruso; Israel's Alma Lasers (for beauty treatments); Saladax, a biomed firm; and the building where my mother used to work, 1 Chase Manhattan Plaza, the former executive offices of the bank later merged with JP Morgan. Morgan had a venerable pile on Wall Street whereas the Chase skyscraper, built in the 1950s, had became redundant.

I am upset that Mr. Guo changed the name of the building to 28 Liberty Plaza. The number is lucky in Chinese as 8 sounds like “wealth” and 28 is “double wealth.” Liberty harkens to the Statue in NY Harbor which can clearly be seen from the higher floors where David Rockefeller (and my mom) worked. I am not sure what China thinks about liberty. As an immigrant from Nazi Germany my mom was firmly in favor of it.

Another Buffett note: Bill Ackman told Bloomberg TV yesterday morning that he considered following the Oracle of Omaha into ownership of shares of British supermarket chain Tesco. Ackman founded and runs top-performing Pershing Square Capital, a hedge fund. He said he had not discussed his idea with Buffett. But he dropped the idea thinking back on his difficulties with retail in the past, when he put money into JC Penney.

However I suspect neither Buffett nor Ackman ever moved beyond the TSCFY accounts (now revised downward because of misreported sales and profits) to actually visit a UK supermarket.

Defying the sage once led me to doing it again, a bit more than a year later, when we bailed out of Posco, PKX, the South Korean steelmaker despite Buffett anointing the firm with his presence. This time we took a loss. I did not visit the main steel mill in Pohang but just considered the way demand was falling. I took a loss but were he to sell now, Mr Buffett would take one nearly 4x as high.

 

More for paid subscribers today about what the currency changes mean for our Indian and Swiss stocks along with a new pick from Martin Ferera, and more news from Finland, the Netherlands, Israel, Britain, South Africa, Australia, Colombia, Mexico, Portugal, and Canada.

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Why Blog?

Tue, 2014/09/09 - 1:47pm | Your editor

I voted in my NY primaries. Then I got held up by hordes of schoolchildren blocking the exits from the basement polling place; I think they might also constitute a fire hazard without older people on the stairs. Hence the blog is late. Sorry.

It is New York Fashion Week but I have no idea if the new modes will sell.

There is a huge full moon expected tonight but it may rain on the lunar parade; luckily we saw a fat moon two months ago at the Stratford Westfield shopping mall.

I do not have any insight into what makes Vladimir Putin tick or how to deal with ISIS, Islamic State, or whatever it is called now.

I am stumped about the cure for Ebola virus, and by the way also for Marburg virus.

I have no idea if we should buy Alibaba at the ipo even if the 40 Thieves are included in the deal.

Adrian Ash from www.Bullionvault.com (our advertiser) set my mind to rest about the new regime at the London Metal Exchange. LME changes affect only centralized forward price data distribution, not spot. Bullionvault is a site where you trade spot gold. Forward trading in London is marginal according to Reuters, accounting for only 5% of gold trading, mostly mining industry hedging. Adrian is head of research at www.bullionvault.com, in my opinion the easiest and cheapest way for Americans to own physical gold.

Another pre-subscriber wrote about finding my insight into political situations interesting, why he “devours” my free blog. SR adds:

“My investing history is another story. My family has a long history of trading which I fell into as a young man. I even became a licensed commodities broker.

“At 69 years of age I am looking to buy and hold quality dividend-paying stocks. I am basically going it alone and there is no one else I would even consider following.” But he isn't following me either.

Meanwhile KAJ writes that he plans to sign up “once the market dips.” Right after they ring the bell? Why do I blog?

Maybe I should copy Bill Bonner and Louis Navellier and launch a limited entry family trust to monetize the work I do.

More follows for those who read my blog to make money in stocks rather than for my insights or amusement. We have not one but two sells today and news from Australia, Britain, Brazil, Canada, Singapore, Spain, Switzerland, Israel, Dubai, Mongolia, and Ethiopia. Plus a company report.

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Sudetenland Revisited

Wed, 2014/09/03 - 11:24am | Your editor

The deal being worked out over eastern Ukraine sounds like the 1937 Munich capitulation and unlike the British rush to defend Polish borders 75 years ago in Sept. 1939—right down to the presence of a supposed outsider in the deal (Hitler in 1937; Putin in 2014.) For Ukraine, not a member of Nato and in a bad neighborhood, some kind of settlement with Putin's invaders is the only out.

Putin claimed Russia could take over the whole country with a 2-week Blitzkrieg unless the Sudenten Germans (sorry, I mean the Russian-speaking eastern Ukrainians) were granted some protection from their Heimat (or Maht Radnaya, motherland.)

This is not a lasting solution but the stock markets of the world are rallying.

Hitler turned out to have a problem with oil. Putin has a problem with gas, his main hold on the Near Abroad (Ukraine) and beyond (Germany.) The US is now the largest producer of natural gas in the world, thanks to fracking, according to the BP 2014 Statistical World Energy Review. US production rose over 20% in the past 5 years and hit a record high of 328 bn cu ft/day making us world champs. Putin will eventually face a problem with his Siberian gas cuts strategy especially if the US removes obstacles to exporting crude oil we no longer need at home.

More for paid subscribers follows including a new share pick from our returning reporter, Harry Geisel, plus news from Jordan, Israel, Britain, Canada, Japan, Ireland, Australia, Netherlands, Finland, Russia, and Ukraine.

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How to Give to Harvard

Tue, 2014/09/02 - 12:25pm | Your editor

We spent the Labor Day weekend in Cleveland which is exactly the same distance from Washington, DC, as Moscow is from the nearest Ukrainian border.

How to handle the dunning letters from Fair Harvard? A classmate, Sherman Lewis (no relation) suggests trying to donate to your Alma Mater by demanding that the money go to a new Social Alternative Fund. Go to http://alumni.harvard.edu/ways-to-give/social-alternative-fund and put “credit to the class of 19xx” in the comments box. Then the website will tell you you have made a mistake.

His strategy is intended to keep the money from the underperforming overpaid Harvard Management Co. and to protect against investments in a corrupt Rumanian company, 100% owned forestry firm Scolapax SRL; a Chilean logging co. it also owns, convicted of illegally chopping down native forests to plant eucalytuses; and two further stakes in Argentina's Corrientes Province which threaten wetlands/ These are to build up Harvard holdings in “alternative investments” like timber.

Real Estate diversification is just as shady. Harvard Endowment owns 100% of the non-union Double Tree Allston Hotel (across the River Charles). Boston has seen attempts to unionize hotel workers. The Endowment also invested in what may have been groundwater supply plays in Santa Barbara and San Luis Obispo Counties, California to benefit from drought.

Despite its salary excess, but perhaps because of the underperformance of these controversial “alternative investments”, endowment staffers are walking, starting with the CEO and CFO. Visit www.responsibleharvard.com and click to http://divestharvard.com to get a more transparent and responsible endowment.

More below for paid subscribers from around the global village we cover including fund updates and a soaring share:

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Give to Harvard?

Thu, 2014/08/28 - 12:21pm | Your editor

Give to Harvard, Give to Harvard,

With your blood and your sweat.

She needs more, millions more.

Give to Harvard, Give to Harvard,

With your blood and your sweat.

She needs all she can get.

Your editor will attend a family gathering with at least 6 Harvard alumni over the holiday weekend, so we may discuss whether or not to donate to our Alma Mater. Harvard's overpaying its endowment managers is a reason not to give, according to members of the class of 1969 who are preparing for their 45th reunion. Some members of the class of 1969 published an open letter to Pres. Drew Gilpin Faust after they found that compensation by Harvard Mgm in salary, bonuses, and benefits had more than doubled in 3 years to $132.8 mn for FY 2013 (the last for which Harvard has reported). Bloomberg and the Boston Globe got a copy of the letter.

Harvard's expensive investment managers didn't invest very well. Its endowment gained all of 11.3% last year, despite the heavy spending. Meanwhile Yale gained 12.5%. Another Ivy League college, the U of PA, gained 14.4%. Harvard's total endowment closed the FY at $32.7 bn. To quote the alumni, staff salary and benefits were “increasing at a much faster rate than the endowment.”

Harvard is still trying to get back to its glory days before the global financial crisis when it had so much money at hand (nearly $37 bn) that in mid-2008 it planned a Crimea-style takeover of Allston, a town across the Charles River, now backburnered by Pres. Faust, if only temporarily after the endowment fell by $11 bn in the following year. About $1.25 bn was to unwind debt derivatives hit by lower interest rates, and another large sum for getting out of under-water real estate.

It replaced Mohammed El-Erian, an American, who had headed the Endowment for 2 years between two periods as a Pimco senior manager. El-Erian resigned to live in a more congenial California climate. Early this year he was ousted by Pimco's Bill Gross while remaining as a non-resident on the executive and advisory committees of its German parent, Allianz Versicherung. He now also writes a very good widely-syndicated column in The Financial Times.

 

As forecast, the mere hint of a weaker euro led to boosts in the price of the yellow metal and gold mining shares yesterday. More for paid subscribers including two poorish quarterly reports, one of them published in advance because of my efforts from Britain, Denmark, Hong Kong, China, Israel, Ireland Australia, Singapore, Canada, Portugal, France, Brazil, Argentina, and Ireland. There will be no blog Friday or Monday.

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Flak and Bleeding Brass in Canada and Finland, Israel and Argentina

Wed, 2014/08/20 - 12:44pm | Your editor

 

Argentina is trying an end-run which may result in its being held in contempt of court, to avoid having to negotiate seriously with the hold-out hedge funds over its debt. These owners of ~10% of the bonds refused to join in the 2005 and 2010 deals to extend duration and cut yield on the bonds. They had been issued by Argentina under US law during the prior Argentina government of Nestor Kirschner, whose widow, Cristina Fernandez, now runs the country.

Cristina yesterday proposed a law that would make Banco de la Nacion, a govt-controlled local bank, trustee for the refinanced bonds, in place of Bank of NY-Mellon. A US judge has ruled that BNY is not allowed to make payments of $539 mn on the refinanced bonds unless it also paid the holdouts. As a result, no payments can be made, putting Argentina into default. Read more »

Peronist Perils and Lots of Biotech

Tue, 2014/06/17 - 1:00pm | Your editor

The timing could not be more sinister. Argentina has ruled that the neo-Nazi Partido Bandera Vecinal will be legally allowed to contest the next election. Bandera is headed by Alejandro Biondini, a man with a Hitler mustache who appears on facebook and youtube doing a Hitler salute.

Yesterday, the US Supreme Court ruled against an Argentine appeal against its having to service hold-out hedge funds. The hold-out funds, having bought heavily discounted defaulted Argentina 2033 bonds remaining on the market after its 2001 default, then refused to join the the debt restructuring in 2005 and 2010. About 90% of bondholders agreed to accept conversion of the defaulted bonds into new ones with longer maturity and lower interest rates. Today Pres. Cristina Fernandez said the hold-out hedgies are practicing “extortion”.

Under the refinancing terms, no negotiations can be held with the hold-outs until next year. Meanwhile, not paying them along with the refinancing creditors, as US courts have ordered, counts as default. So it has to pay both lots of bond-holders under international rules, which would cost about a half billion dollars. Moreover, intermediary banks handling international payments of interest risk being sued by the hold-out funds. The jurisdiction of the restructured bonds is New York law, which means our Supremes' ruling is final.

What makes the two bits of news scary is that the leading hold-out hedge funds are NMB Capital's Elliott Fund, run by Paul Elliott Singer, and Aurelius Capital, run by Mark Brodsky. Both Singer and Brodsky are Jewish, something Pres. Fernandez did not need to mention.

You cannot safely eliminate Jews from capital markets. Even 70 years after the Nazi defeat, German stock exchanges miss the country's Jewish investors who emigrated or were killed. German listed stocks are not owned by German investors either directly or through funds. The largest holders of German stocks are American investors, followed by investors from other EU countries. German shareholders are third on the list.

The Peronist Party which Cristina Fernandez heads has moved away from the flagrant anti-semitism of its founders, Juan and Evita Peron, during the Hitler years. But it can revert if it has an opponent from the far right to counter.

 

More for paid subscribers, not from Argentina where we have not invested for over a decade, but from Canada, Spain, The Netherlands, China, Ireland, Finland, Britain, and Belgium. Lots of biotech and pharma news and a new stock buy today.

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Politically Correct in Cambridge

Tue, 2014/06/03 - 1:26pm | Your editor

I have something to get off my chest, which you may want to ponder.

The Radcliffe Institute was founded 15 years ago to sop up the endowment of the former woman's college I attended before it opted to be absorbed by Harvard. This merger, while opening up more places and grants for women undergraduates, also ended a near-century focus on BA education for women. I attended a day of lectures and presentations by current and former scholars at the Radcliffe quadrangle last Friday. The new era of college political correctness has led to honorary degrees or commencement speaker slots being denied to people who had offended the current liberal-populist orthodoxy, criticized in his commencement address by honoree Michael Bloomberg, the former NYC mayor, the day before. But even worse occurred at Radcliffe Day.

I was deeply offended when the introductory first speaker, who heads the Radcliffe Institute nattered on about the long history of the exchange of ideas by citing medieval “scholars sitting under the palm-trees in Timbuktu”, before segueing on to call the Radcliffe Institute “the Mecca and Medina of ideas.”

The speaker, Lizbet Cohen, by the way, was neither African-American nor Muslim, but female like the majority of the audience, and the majority of Radcliffe donors. I nearly walked out, and to his credit, my husband, one of the few male attendants, agreed.

If you are as unaware of it as she was, Islamic theology teaches that women have only half the soul that men do. This justifies hampering female education and liberation in many traditional Muslim countries.

Moreover, unlike other mainstream monotheistic religions, Islam doesn't allow theology and practices to be easily undated or liberalized. Mohammed was the culminating prophet, and there can be no other. That is a problem for the Muslim men and women faithful, and not me, to deal with.

But to refer to the brilliant Islamic scholastic past at a women's academic institute without recalling the misogyny which accompanied it is a proof, not just of the temptation to rewrite history, but also of contempt for the intelligence of the audience.

I will hereby cease donating to Radcliffe, having cut off Harvard during the reign of Larry Summers. I will hitherto donate only to The Bronx High School of Science.

 

More from around the world follows for paid subscribers including a new stock pick. Join them or test drive the full www.global-investing.com package to see what you and your portfolio are missing. To stop piggy-backers, we are not updating our ticker symbol list for this issue until later in the week, after which those who have paid will have been able to do the trades recommended. Note that there will be no blog Weds., the Jewish Pentecost holiday.

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21st Century Customer Service

Mon, 2014/06/02 - 1:29pm | Your editor

 

The start of a new month brings new horrors to the victims of 21st century customer service. Here are some examples from less than 4 hours after the start of the first workday of the month:

  1. 8 am phone call to my emergency number from Dun & Bradstreet in the Philippines to go over the changes they are (at last) making to my mis-stated corporate listing;

  2. bill from a radiology clinic for the last mammogram I had which said my insurer denied coverage and demanded over $500 for the procedure. It had been scheduled after the radiology clinic told me it was time for the an exam, and after my doctor sent them the forms to proceed with a test that is supposed to be free from women my age;

  3. calling the toll-free number from the radiology clinic's billing service offered linguistic options but no way to contest the bill;

  4. two of those mystery meat messages from e-trade to tell me shares I own are “in play” with no way to get further information either via the message or by logging into my account;

  5. calling the broker's toll-free number, after the smarmy welcoming message, I heard news that their (haha) “Platinum Service” was down. Trying to send an email message to the brokerage produced a blockage for “invalid characters” of which there were none.

 

A 2nd Spanish company has signed up to escape the clutches of Gazprom. Iberdrola SA will buy $5.6 bn of natural gas from Cheniere Energy of the US. The operator of Israel's Tamar offshore gasfield, Noble Energy, will sell natural gas to Union Fenosa, a Spanish company seeking safer and cheaper gas supplies.

 

More for paid subscribers about the in-play stock and other matters follows from The Netherlands, Finland, Ireland, Pakistan, Australia, Switzerland, Britain, Colombia, South Korea, Israel, Hong Kong, and Canada. There will be no blog Weds which is a Jewish holiday.

We had technical issues posting the performance tables from Boston over the weekend but they are now up on the www.global-investing.com website. View the ones you are allowed to see.

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