Back In Iceland Again

Fri, 2016/12/16 - 11:39am | Your editor
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After a half century of not flying to Europe via Reykjavik we went to Iceland again yesterday to avoid painful holiday season prices on flights to London, mainly because BA would not accept our miles in payment. In the runup to Yule in the Old Norse-speaking island of Iceland, the days have barely any daylight and people revert to their ancient Viking supestitions. Gryla, a witch or ogressnwho eats children and her evil Yule cat Jilakotturinn settle down in the towns and villages along with her 13 mischief-making sons with names like Kertasnikir (Candle Nicker) or Askasleikir (Bowl Licker), Prousleikir (Spoon Licker) or Bjugnakraekir (Sausage Thief). The cat bites anyone not wearning at least on new garment on Christmas Day.

It is all much more fun that benevolent Santa Claus although the mischievous lads also leave presents for children who have been well-behaved. Iceland has one of the most flexible economies I can think of. After fishing became over-competitive the country switched to high-yield banking. After that went bust (taking out government ministers who had been behind the push), it started refocusing on population health databases (easy in a small well-tracked population) and winter tourism. Hundreds of Britons among those who did not lose their money in the Icelandic banking disaster of 2007 are now willingly flying to Iceland to visit hot springs and glaciers and volcanos, and to view the local wildlife, very long-haired horses the size of ponies and reindeer, a word from Old Norse which we all can understand.

 

Mexico's Banxico (central bank) raised interest rates by 50 basis points to 5.75% which shows the risks of a strong dollar to emerging markets. Bank regulators in the US raised the amount of capital required for too-big-to-fail banks while the European Union cut the capital it requires for its banking sector, in the hope of boosting animal spirits and loans. US small caps are showing great expansion even before the new Administration feeds the frenzy while unemployment continues to fall. There is a disconnect between our country and the rest of the world—not just China but also Japan, where stocks are soaring as the yet loses traction

More for paid subscribers today with a double-sized close-of-week report from London with news from India, Africa, Mexico, Brazil, Colombia, Hong Kong, and Argentina among developing countries, and Israel, Spain, Australia, Canada, Hong Kong, Britain, Japan, Switzerland, Finland, Sweden, Iceland, and Ireland. For a change we start with fund news.

 

Funds

*Valeant, the Canadian drugmaker in trouble with regulators and stock pickers for its private pharma fulfillment firm, now sold, and its price hikes, lost 3 top execs with effect early in 2017. They are jumping ship the moment their multimillion dollar retention bonuses run out Dec. 31. It does tell you something about the former management which lured in all those institutions, as well as what the future holds for our big player in VRX, Pershing Square Holdings, PSHQF, a UK closed-end fund run by Bill Ackman. He is also in deep do over other picks. The 3 departing managers collected $6.8 mn in retention bonuses before they hit Go. We bought PSHQF (PSH in London) to learn from Ackman about 2 years ago. 

 

*To buy we sold Africa Opportunity Fund or AOF, listed in London, at a loss. However an insider last week bought 434,000 pounds sterling worht of AOF stock at about 41 US cents/sh.

 

*FibraUno, the Mexican REIT which trades in the US as FBASF, put out a report to show that its risks from the Bank of Mexico rate rise is minimal. Its debt is 83% for over 6 years and no repayment is due on this until 2014. It has unused revolving credit facilities totalling NMP 7.1 bn and US $ 410 mnb. FBASF debt leverage against capital is only 34%.Its debt is 76% at fixed rate and 93% secured against assets. Its debt is 51% in pesos which are costing more in interest and 49% in US$s which at the moment are cheaper. These revelations are a reaction to the REIT shares falling 2.7% in the wake of the Banxico doubling its interest rate rise against that of our Fed.

 

*Saba Capital, an insider, reported to the SEC that it had bought another $1.28 mn worth of shares of Advent Claymore Global Convertible, a closed-end fund. AGC is in our model portfolios because at a time of rising interest rates, convertible shares and bonds make investment sense. However Saba is buying to try to get at the cash in a battle with the existing management group. Saba is officially offshore from the Cayman Islands but is really Canadian. 

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