Who Predicted This?
To quote the perhaps apocryphal Yogi Berra, ''never predict, particularly not about the future.''
Who would have thought a year ago that the trend in the global valuation of the renminbi would be down, and that Chinese would be busily doing fake shopping deals in Hong Kong plus fake casino chip buying in Macao to get their money out of China?
And who would have expected that we would still be getting excited about an 8.3% unemployment rate this far into the supposed recovery?
Who would have thought that rather than driving tourists away, the supposed end of the world under the Mayan calendar is bringing curious vacationers to Mexico?
Who could have forecast that my nephew's movie invention (in Attack the Block, a marijuana plantation-factory in a British housing project) would have a real counterpart in the slummy East Bronx where the cops bust a multimillion dollar Bronx Pot-anical Garden like what Joe Cornish's movie featured?
Who would have thought that to build a railway between Tel Aviv and Eilat, the Israelis would be bringing in a Chinese contractor?
Who could have predicted that the Greek crisis would continue into yet another year and yet another month as the euro-bloc leaders continue to kick the can down the road?
Who ever predicted the dire collapse of natural gas prices in the USA, throwing strategies for alternative energy into disarray?
Which pundit forecast that smoked salmon would be so widely produced that its price would fall from the luxury levels of my childhood and that apart from the Nordic world and Nova Scotia, there would be salmon farms producing tasty lox in places like Morocco?
Who could have foreseen that my outside consultant for marketing would be cutting back on work in order to study to become a rabbi?
Why is Farcebook which I consider the worst 21st century investion yet turning out to be viewed as worth a fortune? I am a prisoner of Zuckerberg. I cannot stop messages coming from readers who have my e-mail on their systems. And they cannot stop sending stuff to me. So when Facebook claims that every 6th person in the world is a customer, take it with a grain of salt. I do not like Farcebook as it is
a waste of time (which I lack) with useless trivia;
insidious with ads telling me where to shop;
a way for readers to seek investment advice I am not allowed to give them non-publicly and individually under SEC rules.
WSP Holdings of China, with ADRs listed on the NYSE as WH, is having to reverse split to raise its stock price. The new ratio will make each ADR equal 10 rather than 2 Chinese shares. By Feb. 15, holders will get a new share worth 10 ordinary whares for every 2 they hold. No new WH ADRs will be issued. The exchange is being done by JPMorgan Chase, but there is no guarantee that after the split e the ADR will trade at the new ratio to ordinary shares. The theory is that institutions banned from ''penny stocks'' will be able to buy the weightier shares and will want to do so.
We sold this baby when it became clear that Chinese seamless drilling pipes were subject to US countervailing duty because of subsidies at home.
The same thing could happen to Chinese solar shares which may also collapse. Or, to quote Yogi, which may not collapse. Or to rare earths. Or not.
More for paid subscribers from Brazil, Norway, Britain, Colombia, Canada, Mexico, Botswana, Texas, Israel and Nevada.
Our Stocks Soaring
So what if the capital's subway system is blocked by strikers. So what if the country's bonds trade at half their face value for fear of default. Europe's oldest country with fixed borders, Portugal, is keeping the barriers high.
Being touchy about your sovreignty is not only practiced by Greece against German attempts to oversee the Athens budget process. Portugal is taking on Os Estados Unidos. The US lost another appeal to extradite George Wright, 77, an escaped fugitive, turned down by the Supreme Court in Lisbon, near where he was captured. Portugal says Wright is now Portuguese and the statute of limitations for sending him to the US has expired.
Actually, I am pretty upbeat on Lusitania. The country has a great future in tourism, substituting for North African destinations with revolutions or terrorism scaring people off. It's finally cracking down on Madeira's regional autonomy; the island's spending is the main cause of Portugal's budget deficit. Lisbon's deficit totals a rather modest 103-111% of gross national product (depending on which statistician you listen to), well below the horror levels of other PIIGS countries. Moreover Portugal is cracking down on tax evasion, also often centered on its offshore islands like Madeira, or involving offshore companies in Gibraltar to own holiday homes.
Ao fim e ao cabo, there is no easy way to invest in Portugal. Its Banco ADRs and preferred shares have gone and the Portugal Fund has closed its doors.
The 3rd breakdown in a couple of years of trading on the Tokyo Stock Exchange leads me to an unproven theory, that high-frequency trading not only cheats those trading more slowly. Hedge funds and operators 'front-run' fund managers, pension plans, and brokerage customers to prevent them from buying or selling at the prices they seek. They trade a fraction of a second faster than the real stock market because of physical proximity to the electronic trading floor, which they pay to get. They are set up to find big trades which may have been split between several market-makers to hide them.
HFT also stresses the stock markets by causing flash crashes and total breakdowns in the trading systems. Today 53% of all trading on stock markets is HFT.
More for paid subscribers on Portugal, Israel, Singapore (all good news), Britain (mixed news), Australia, The Netherlands, and Texas. Plus news of three of our closed-end funds and a new recommendation. Several of our shares are soaring.
Hemingway, Orwell, and Jim Rogers
Some readers are upset that I'm not brief enough. Yesterday 3 of them wrote to complain about how long and detailed my writing up a company result turned out to be. They were annoyed at the number of data-points I included in my writeup of a Spanish company's Q4.
It's as if they are annoyed with Robert Jordan hanging around the Sierra de Guadarrama in For Whom the Bell Tolls trying to decide whether or not to blow up the bridge to stop the Franco forces from besieging Madrid. They will not give him a chance to think about what doing so would mean to his lover, old Pablo, himself, and a lot of others. While not writing fiction, I am also not jumping to conclusions any faster than the American hero of the book.
Investing is complex and ambivalent as the Spanish Civil War was. If you don't believe me, read another classic, Orwell's Homage to Catalonia. And in case you didn't know it yet, financial jouranalists are not Hemingway-esque writers in any case.
My stock report yesterday was based on a crack-of-dawn conference call by three officials of the reporting bank who spoke in Spanish. I had to keep them apart despite their using the same English-translators who often messed up banking terminology. My job was to cover the company results, not to hastily jump to conclusions churning out investment advise not thought through.
KH, one critic, canceled his sub. But I hope other reader will give me a chance to show that Jim Cramer-style instant analysis does not pay off. A day later I have a view on the bank from Spain.
More today from the wildest markets on earth, and also about other closed-end funds, plus news from Canada, Britain, Colombia, Jordan, Argentina, Sri Lanka, the United Arab Emirates, Qatar, Saudi Arabia, Jordan, Kenya, Nigeria, Kazakhstan, Mongolia, and Brazil. Oh, and Britain.
Eye of Newt and Mitt the Bane
Michael Kurtz writes from Nomura in Hong Kong:
''Hong Kong-listed China stocks lagged for 2 years through late 2011 on a now well-aired combination of headwinds -- including counter-cyclical credit tightening; concerns about the sustainability of investment-led growth; profitability setbacks from rising labor (and other) costs; and uncertainties over 2012's leadership transition.
''The structural problems aren't going away any time soon; tough challenges remain squarely in China's path. Yet stocks' most immediate headwind -- the year-long credit stranglehold that fuelled fears of a 'hard landing' and mass business failures -- is easing, as December's 8-month-high new bank credit (of RMB 640bn) made clear. Further monetary relief lies ahead, in our view.
''To be sure, a 'soft patch' for Chinese demand appears upon us in the first half of 2012, owing chiefly to a pause in housing construction. But we think this was priced-in by H-shares' 21% 2H11 decline. With China stocks having de-rated by more than 30% to a region-low PER of 8 by Q4 2011, we think investors grew too downbeat on an economy still generating respectable medium-term demand growth.
''Indeed, our 2012 nominal GDP growth forecast of 11.9% still offers the Asia-Pacific region's 2nd-strongest platform for corporate earnings (after India's inflation-propped 14%). Against this, 2012 consensus H-share earnings growth of 11% strikes us as achievable.
''Moreover, our quarterly GDP forecasts suggest a 'V-shaped' recovery around midyear that China stocks should continue anticipating in the weeks ahead -- especially as further policy loosening provides a catalyst for portfolio cash deployment and short-covering.''
Today is vote day in the Home of Hanging Chads as Eye of Newt and Mitt the Bane fight it out. It reminds me of Greece. While Germany wants the European Union to supervise the Greek budget process to slash Athens' deficit, nobody is willing to let the Greeks supervise the German budget process to increase spending to help the Club Med.
Here in the US Florida can decide on our President in a farcical paper chase, but the rest of us have no say in how Florida determines the Republican presidential candidate.
Interestingly enough, hard-money Hayekian Peter Schiff also says to vote for Romney. Me too.
More mostly from Spain today with news also from Los Americas: Mexico, Brazil, Colombia, Peru
Tastes and Trends
Des gouts et des couleurs, ne faut pas discuter.
Is this as good as it gets? Should we be taking profits? Should we be getting out of the market?
My crystal ball is mixed. Yes, we have had incredible gains from one of our large cap shares, and even more amazing jumps in a yield play I advised loading up on big time just 5 weeks ago. Yet as the saying goes, Wall St. (and other markets) rise on a wall of worry.
While we did not benefit from the trends, Wall St. has favored high-yield bonds (including those from emerging markets), scary stocks (BRIC country issues), and financials. We are in risk-back-on mode for now although with Brazil seeing today both drops in share price and drops in the real, at least one of the BRICs has switched to rehab. The reason is not politics (although Brasilia politics can be dangerous to your wealth.) The reason is fear that China is going into a slow-growth period when everyone gets back to work for the Year of the Dragon. There are plenty of other worries.
Start with crooks and incompetents such as Madoff and Corzine. Consider panic fear of inflation and debt. Add fear of stocks as too risky (especially among ''Generation Y'' younger Americans according to Kopin Tan in Barron's). Sprinkle with persistent double-dip talk. Note the unbelievable rush into T-bills and TIPs.
And then there's the news. Greece, not too surprisingly, refuses to let its budget process be taken over by well-meaning non-Greek Diktats. Finance Minister Evangelos Venizelos totally rejected a German scheme for the eurozone to impose a budget overseer on Greece in return for a new 130 bn euro bailout.
Let's not even think about the appalling political process going on in the Land of the Free, heir to Greek Democracy. Between Congress and the Republican primaries I keep having to tell myself what Churchill said: “the only thing worse than democracy is the alternative.” Meanwhile our housing remain an overhang on the recovering economy, with defaulted and under-water mortgages holding back many regions of the country. On Wall St., housing shares are dropping like bricks, with the Philadelphia Housing Sector Index down 1.9%. Particularly hard-hit are fun places, Las Vegas, Florida, and even the Hamptons nearer here.
So perhaps we should sell out and put our money under the mattress for a change? We would save on gouging bank fees and the taxes normal folks have to pay on dividends and interest. We could buy a house by the water.
But that is not what I pitch. Stock picking is my metier, stock advice. In fact, our portfolios are now fully loaded to the point where subscribers complain about how much investing they have to do. The fact is, our team of eager-beaver reporters keep finding great bargains.
Right now China is in visit-Mom hiatus, which happens every year at New Year. It will resume its frenetic growth when people return to their jobs. Seasonal drops in demand for imports will pick up soon. Chartists don't realize that lunar dates vary.
More for paid subscribers follows from Ireland to Israel, from Britain to Australia, from Finland to Norway, from Singapore to Canada, from India to Peru, plus three notes about taste:
Tables Posted
Tables have been posted on the website, www.global-investing.com
Everyone can see the closed positions but only paid subscribers get to see our current holdings.
Use the printer-friendly button to make it easier to read the tables.
Why, you may well ask, are we taking losses aggressively at the start of a new year? First of all, I think market participants are rather gunshy as the indexes rise and likely to reverse course and go back to safety again. So I want to get rid of positions that are high risk.
Then too, I need to raise money for new ideas by selling old ones.
But most of all, I know already that, like last year, there will be lots of luscious capital gains in 2012. Like last year, to the tune of William Tell Overture, Swiss companies are marching on my holdings. They are Swiss perhaps because there aren't many companies which can both yodel and raise money at the same time. Or even raise money without making a sound.
Although it is not in our model portfolio as a pure USA California stock, I have a nice position in Illumina, now under offer by Roche Holdings, thanks to biotech maven PW who gave me the push. While Barron's is too busy being fed ideas by its Round Table to even mention ILMN, it is up $15.39 from last week's close of $36.3 and even more from when I bought it, there is probably more to come.
Having been a bit rude about Barrons' Roundtable, I am happy that its experts and self-promoters like Thermo Fisher Scientific, JPMorgan-Chase, American Express, and a gold ETF which matches some of my own prefered ideas for the non-global part of my portfolio. I eat and pay rent in US$.
More for paid subscribers about foreign stocks below.
Our Horrible Hopeless Tax Code
I agree with what Richard Suttmeier writes in valuengine.com today:
“New home sales slipped 2.2% in Dec. to an annual rate of 307,000. The price of a new home fell 12.8% year over year to $210,300, and 2011 was the worst sales year on record. The inventory of new homes fell to a record low of 157,000. The Federal Reserve needs to channel money to the housing market on Main Street at 100 basis points over the yield on the 10-yr note as long as they keep the funds rate at zero to 0.25% for Wall Street speculators.
“A Main Street refinancing plan for all homeowners will create jobs and help stimulate the economy.”
Trading Alert
Today I sold some shares. More details for paid subscribers. Before going into that I wanted to explain that the remark made in today's blog about Mormons not being in the Judeo-Christian theology system is based on their interpretation of the New Testament. Mormons view The Father, The Son, and the Holy Spirit as separate gods, meaning they are not strictly speaking monotheists.
But I love hanging around with Mormons to be counted as a Gentile. Mormons call non-Mormons Gentiles just as we Jews call non-Jews Gentiles. The difference is that you can ski in Utah most winters but only occasionally in what may not even be Israel at all (the Golan).
I haven't yet been to see the Bway show called the Book of Mormon. The fact that it's out there is probably better for the religion of Messrs. Romney and Huntsman and others than the earlier link in Angels in America.
Moreover I think Mitt Romney would be less of a disaster for the USA than the other Republicans although more of one for a second Obama term.
Filthy Lucre
Is money earned on money saved or invested supposed to be taxed or is this double-taxation? That is an old philosophical question. Most religions do not approve of money making money which is considered usury.
The monotheistic religions all consider the return from investment as less wholesome than the return from work.
Islam prohibits ''riba'', defined as interest, based on a revelation to Mohamed written in the Koran.
St. Thomas Aquinas, the medieval saint and thinker, famously called interest ''filthy lucre''.
Judaism prohibits charging interest on loans to other Jews. But in the Middle Ages the sages allowed Jews to charge interest on loans to non-Jews, mainly because it was hard for Jews to survive otherwise.
So Pres. Obama's proposal to tax unearned income topping $1 mn per taxpayer per year is firmly within the Judeo-Christian canon. And if it was sheltered by being retained at the firm to cut taxes on its execs as was done by Bain Capital (not alone in that form of perq for execs, who can then pay at the capital gains rate) it is even more vulnerable.
Of course the Church of Jesus Christ of the Latter-Day Saints is not wholly Judeo-Christian and I have a suspicion that its tenets do not condemn usury or money making money.
However, I think it will be tough for Mitt Romney to defend a tax proposal from which he will be a victim with a 30% bite vs a current 14%.
More for paid subscribers follows from Israel, Finland, and Singapore and a few other places where we have ill-got gains from filthy lucre like Israel, India, Germany, South Africa, and Brazil Read more »