Markets in Focus

Fri, 2017/09/29 - 12:22pm | Your editor
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Your editor was startled by receiving from BofA-Merrill-Lynch Global Research a “Situation Room” blog entitled “Happy New Year”. It was not in fact a greeting card for the Jewish and Muslim New Years which began last week, from the broker to Main Street America. The authors were Hans Mikkelson, Yuriy Shchukinov, and Yunyi Zhang, only one of the three, the Russian, remotely likely to be Jewish.

The blog was about US corporate bond investors hedging risk with rolling 3-mo forward forex rates—which now run into the year 2018. The dollar funding costs rose because of US corporates using the hedge. The swap market for forward dollars is also used by non-US banks as window-dressing for their year-end capitalization reports because their balance sheets are subject to regulations imposed at the end of the year. They also use the forward currency markets.

As a result single month currency hedges, which run out in 2017, are cheaper—and longer ones against euros or Japanese yen are up by 7 to 9 percentage points, annualized, a huge spike in the dollar exchange rate. This is a technical oddity which is particularly serious this year because of the likelihood of another rate hike by the Federal Reserve by the year end. Foreign investors like those banks will not gain from an expected increase in US interest rates—because they already are paying it.

The over-New Year interest rate spike also affects global investing picks. Our stompling ground is foreign stocks accessible to mostly US readers (and your US-based editor). So when the dollar is costlier against the currency of the respectable foreign markets in Europe and Japan (the ones where most American Depositary Receipts are home to) our shares go down on Wall Street. This technical move as they year comes to a close hurts our performance almost across-the-board with existing positions, and, because it is short-lived, creates a generalized buying opportunity. For the specific ideas for today, you have to become a subscriber.

 

Thank you to all readers who singed the petition calling for free freezes on new card applications from credit rating agencies after Equifax was hacked. Its new CEO told the world it would allow customers to open and shut credit freezes as often as they like without charge for life. The petiition only sought a single free freeze per year. Now the issue is persuading Experian and TransUnion, two other credit raters, to follow Equifax's lead.

 

Hacks go on. Whole Foods Market, a neighborhood purveyor whose lowered prices have lured me in since it was acquired by Amazon.com, suffered a credit card breach but this only affected its sites with full restaurants and “taprooms” (bars) which luckily are not in Midtown Manhattan. We do not dine at Whole Foods and the hack does not affect Amazon or the supermarkets. The store has called in cyber-security specialists and, in some places, the cops. Its last run-in with New York's finest was when its pre-packed fresh food items turned out to be short-weighted, as a result of which it lost a lot of customers. This led to the Amazon bid being accepted, and for the price cuts.

Readers in lower-rent areas of the country who dine or drink at Whole Foods should check their credit card bills carefully and use freezes if needed.

 

The promised repair of our phone lines yesterday did not take place. Verizon now is expected on the 9th ofn October. If you want to help things along please phone (using a land-line not a cellphone) to Verizon repair at 800 567 6789 saying that you need to speak about your subscription. Our number is 212 758 9480 and you can also say that you couldn't reach me on my direct line either. I am not giving that one out however.

 

Today's issue includes a new stock buy and a new stock sell. We have news from Sweden, Israel, Canada, Brazil, Denmark, Australia, Switzerland, Mexico, and Nevada.

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