The US added a mere 142,000 jobs in Sept and unemployment remains at 5.1%. Jobs day was very disappointing as forecasts (according to Bloomberg) averaged 201,000 more US non-farm hires. The shortfall was huge. Moreover, the August figure was restated, downward. This is the last jobs report before the Fed meets in Oct. The low hires would argue for further delayed rate hikes as would the low inflation rate.
In my humble opinion the jobs data will count for less than how the stock market looks when the Fed meets. Meanwhile the price of gold is up to around $1140/oz.. And the price of stocks is down on the news, a first drop in October after disasters in August and September.
Chaos reigns today on Sutton Place where I live. Mother Nature has not helped. Our apartment is on a bluff overlooking the East River about half a mile from the United Nations building where the General Assembly is assembled. With extreme security imposed, traffic has all but been halted. Now the rains of Hurricane Joaquin have begun to fall. The Post Office, Fed Ex and UPS, unable to bring a truck into the area, are refusing pickups of cartons weighing more than a half pound lest they be damaged by the downpour.
To be sure, it would be terrible for American prestige if an assassination of a visiting chief of state or politico were to occur during the conclave. Imagine if Netanyahu or Mahmoud Abbas was the target!
But frankly, it is also bad for the prestige of my country that any lunatic aiming to kill those at a high school, movie theater, community college, university, military base or recruitment center, historic black church or Jewish community center, and even an elementary school is able to fire and kill away.
More today for paid subscribers focused on our fund portfolio for a change with fund news from Mongolia, The Netherlands, Britain, Mexico, Sweden, and Mexico. Followed by company news from Switzerland, Brazil, South Africa, Britain, and Germany.
Press, Trading, and ETF Scandals
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.
The imminent arrival of a new month has focused market attention on the second round of stock price falls. So what good news was available, like 200,000 more Americans in jobs, or the Senate passing a bill to prevent government shutdown, was enough to get the bulls running again.
On the last day of the quarter, today, two beaten-down sectors recovered smartly: raw materials, and biotechs.
I am reminded of what J.P. Morgan (the man, not the investment bank) told someone who asked him what the stock market would do next. Morgan replied: “it will fluctuate”.
Over the last day in order to meet my payroll of exotic-based writers who write for us, I worked to get them paid via paypal before a new more stringent regime comes into action at the now independent firm. Those we pay in the western world get checks by mail or bank transfers. The process has gone completely wild and I had to change my password 4 times and discuss issues on the telephone with harried tech support personnel after being on hold for ages. I think I spent more time working to pay the team than its members had spent writing the articles in the first place.
The motto is: Vorsprung durch Technik. Progress through technology. Paypal didn't invent this slogan, but Volkswagen did (for Audi, one of its nitrous oxide spewing automobile brands.)
More vehicular news and also a bit on bonds, plus oil and utility stocks for paid subscribers follows today. Plus some finance and drug company news as well.
Harvest Moon Eclipse Selloff
Sunday night, after returning from a wedding in Maryland, we watched part of the lunar eclipse from the East River near our house, but gave up before the finale at 3 a.m.
Because of the Jewish holiday I was not watching the stock market yesterday. I scored a decent gain from one share in the commodities sector, Alcoa, which I have owned since a college friend was on its boards (although she has since retired.) This despite the broad Wall Street sell-off which seems to have been triggered by the lunar events. AA gained because it is splitting in two.
But I also booked a serious loss with Williams Cos., supposedly a safe natural gas midstream transfer company immune to the impact of lower gas prices. Having scorned an earlier takeover bid, it wound up settling for less after it could not find an alternative bidder to Enterprise Products Partners.
Similar shocks also hit global markets, where M&A and other developments also impacted shares in our portfolio.
Mark Hulbert wrote yesterday that US bearishness hit an extreme high comparable to levels of 2000 after the tech bubble. He also wrote in Hulbert's Financial Digest yesterday that great bearishness creates “a robust wall of worry for the market to climb.” His Hulbert Nasdaq Newsletter Sentiment Index, created when both of us worked for Bill Bonner of Agora Inc., , is his letter's most sensitive barometer of investor sentiment, although there are some specialists who want to refine it further, among them retired professor David Aronson of Baruch College, the CUNY business school in my fair city. A very low adjusted or unadjusted HNNSI may mean the market tests the August lows before it rallies. Ah contrarians!
Our India correspondent wrote about the big news today: Reserve Bank of India, its CB or central bank, cut its reverse repo rate by double the 25 bp anticipated by all, to a full half a percent point. The money rate is now 6.75%. This is the 4th rate cut in 2015 after local inflation fell to a new all-time low. Only one economist predicted this. Abhimanyu Sisodia writes:
Lower rates mean more money being lent by banks to the public and create liquidity in markets. The CB is being aggressive, to privde a rising market with stimulus. It also indicates that internationally-respected Governor Raghuram Rajan feels that the risk of inflation is low given benign global and Indian demand.
In addition, Indian authorities relaxed rules limiting foreign ownership of Indian debt, giving foreigners access to what has been the best performing bond market on earth this year. India has merged its stock and commodities markets regulators. One result might be the listing of the Mumbai-based Bombay Stock Exchange or its rival, the National Stock Exchange. These bourses would be a fab investment, I think.
Meanwhile Colombia, close to a deal with its 50-yr-old FARC guerilla movement, raised its interest rates 25 bp to 4.75% in a surprise move aimed at limiting inflation to around 3%.
More for paid subscribers from Canada, India (not from Abhimanyu), Italy, Ireland, Britain, Spain, Germany, Hong Kong, Kenya, Brazil, Israel, The Netherlands, Denmark, and Finland, including more bond market news.
It has been a rough year so far for investment newsletters, and not just mine. Readers may want to look at www.stockgumshoe.com whose editor has calculated the return on investments promoted YTD by the marketeers from the big publishers: You can either view the attached spreadsheet or visit the site edited by Travis Johnson which offers a free trial for 10 days to new subscribers.
*NY reader BN sent a note about Volkswagen, not a share we have recommended for two decades:
Do you know the difference between the three different VW common stocks on Bloomberg? Two sponsored ADRs (VLKAY and VLKPY) and one common stock (VLKAF). It appears that VLKAY = .2 shares of VOW GR, and VLKPY = .2 VOW3 GR, while VLKAF = 1 VOW GR.
Response: the ADRs are for the common and preferred shares and the F share is a US way to trade the German common 1:1. More on European carmakers on shares we do recommend for paid subscribers below along with news from Benelux, Israel, Canada, Ireland, Britain, Denmark, Switzerland, India, and Mexico.
A New Stock Pick
Even before the Pope hit NYC, my 7 am newspaper delivery was short The Financial Times. I don't think it was shipped from Japan now that Nikkei owns the pink paper, but “who am I to judge?” On a day when everyone is quoting Yogi Berra, I want to quote Pope Francis.
The handshake between the head of FARC and the president of Colombia Juan Manual Santos (with Raul Castro holding their hands down) marks the conclusion of negotiations over ending the 5-decades-long guerilla war on Colombia's government. This should result in a peace treaty in six months or before. The arrival of Senor Santos marked acceptance of a fudge over punishing the rebels, most of whom will be amnestied and tried by a special tribunal and not jailed. They may have to do public service or suffer house arrest. Only those who committed crimes against humanity or war crimes will not be amnestied and have to help with de-mining, which is dangerous. Victims will get reparations in all cases. But the devil is in the details. We have a stock for this.
The latest whizz in exchange traded funds is ETFs covering global markets overall or the emerging markets or even the BRICS—while excluding China. How much simpler to just buy stocks!
For whatever it is worth, after a 3 day market shutdown, Tokyo re-opened sharply down. More for paid subscribers from Italy, Germany, The Netherlands, Israel, Spain, Canada, Switzerland, Britain, France, Britain, Colombia, and Sweden.
Whisky Galore II
Gemar chatima tova; may the sealing be well-completed. This refers to the Book of Life in which each individual's fate over the next Jewish year is written on the New Year and sealed tomorrow, according to medieval Jewish theology. Tonight is Kol Nidré, the start of the Day of Atonement or Yom Kippur so there will be no blog tomorrow.
Because we will be in Baltimore for a wedding, there will be no update of our performance tables this weekend. And next Monday there will be no blog because of the Feast of Booths, Sukkoth. This is when Jews wave palm branches, which may be the origin of Palm Sunday, but it is half a year out of phase with the following Sunday, Easter. So maybe it is not where Palm Sunday came from.
I got the expected heavy response to my note yesterday about Whiskey Galore from widely-located readers in places like Panama and Britain. Canadian Maurice F reproached me for being insufficiently wise on whiskyish matters, writing:
“You will find that whiskey from the US and Ireland has an “e” in it but from everywhere else doesn’t
I can tell you are not a serious whisky or whiskey drinker otherwise you would have known.
“According to Wikipedia, India is the third largest whisky market. You will never guess the top 2. I didn’t. Hint: other BRIC countries.
“India is a huge producer and market for whisky (the Indians probably import Jack Daniels and Jamiesons - so whiskey is probably penetrating their market) and goes without the “e”. I have also had a French variety appropriately named Bastille, actually quite good. You should start having the odd tipple more often.”
In my defense, yes I know that the Whisky Galore movie was set in Scotland and that British and Canadians spell the word differently than my spell-checker. I mentioned the UK spelling so Maurice and other non-US readers can find the right site on the internet, based on the British spelling.
Revelation that Volkswagen also gamed the exhaust systems of diesel vehicles sold outside the US took down the share price another 18% in European trading today. What were they thinking? VW is controlled via preferred shares, half owned by the Porsche family, and the rest held by the German Federal State of Lower Saxony, institutions, and Qatar. Its supervisory board, which is supposed to advise management, is headed by a trade unionist. This is supposed to be a family enterprise with strong inputs from local government and employees. Yet the shares are collapsing after the CEO, an engineer, admitted that the largest car-maker in Europe had cheated and polluted in violation of environmental regulations on both sides of the Atlantic.
When this newsletter was still printed rather than on the web we used to own VW's sponsored JP Morgan 5:1 common-share ADRs, traded here as VLKAY-OTC. It is far too soon to get back into this share especially during a market selloff. Jim Cramer is buying; I'm not.
More for paid subscribers follows from Australia, Belgium, Britain, Finland, India, Ireland, Israel, and Mexico. As is fitting for the day before Yom Kippur, the market is deeply in repentance of all prior bullishness.
With interest rates in much of the developed world still scraping the bottom, with stocks losing altitude, with oil, gold, and other raw materials sinking in price, it's hard for readers to find growth investments.
Today, thanks to Adrian Ash, the research head of www.bullionvault.com, our advertiser, we have a new investment idea combining growth and value. What do you think of Whiskey Galore?
While I am not allowed to share the details with you, our advertiser is turning to drink. Thanks to the links between www.bullionvault.com CEO Paul Tustain and whiskyinvestdirect's CEO Rupert Patrick, who attended school together, bullionvault plans to offer what it does to gold investors to those wanting to buy Scotch in storage.
It will be kept in approved warehouses and tradable 24/7 on line in open auction on the site. Bullionvault is investing £2 mn in whiskyinvestdirect.com but this will not make much of dent in its shareholder funds of £26 mn. The site will acquire stock of young but maturing whiskey that you can buy on-line. There is no risk to our gold or silver holdings at www.bullionvault.com which is now 10 years old, and rates as the world's largest physical gold and silver exchange.
Adrian begged me not to write up the whiskey site until it is set up to accept US$s as well as sterling, but as a journalist I cannot resist a scoop. He stated:
Looking ahead, we believe the case for precious metals investing remains plain, both as a proven diversifier for your other assets and an insurance policy against the credit-bubble collapse which QE and zero interest rates have merely delayed, and in truth worsened.
Scotch whiskey offers a separate, and compelling, opportunity. Long-term savers already holding a good spread of other investments can learn more, and test-drive it with a little free spirit today, at WhiskyInvestDirect.
Vivian adds: While I have changed the spelling of whiskey to conform to US rules, the name of the offering agency spells it UK-style, whisky. Note also that while non-UK investors are welcome to join the venture, they will have to convert their investment into sterling for now, until the mechanisms for paying in with foreign currencies are in place. Those outside the UK will get a bit of free spirit in their account for signup, not in their glasses.
There is a minor risk from Scottish nationalism, as this London-based firm might turn out to be from a different country. Note also that taking physical delivery of your Scotch in the USA would incur huge shipping and excise taxes, and is not really sensible. And remember that mature whiskey takes time to reach its price peak so this is not a quickie investment and needs to be savored slowly.
Moody's cut France's credit rating to Aa2 from Aa1 with stable outlook short-term and weaker outlook medium-term. French Finance Minister Michel Sapin reiterated France's commitment to economic reforms. Maybe we can buy aging cognac.
Volkswagen's stock has crumbled by nearly 28% today after it admitted the US Environmental Protection Agency was right that it had set up a system to remove sulphur dioxide emissions from its diesel vehicles sold here only when pollution tests were taking place. This surprise second largest ever one-day percentage fall for a German stock came despite the Frankfurt market being institutionally driven. Analysts are busily scurrying to mark down their VW target prices to euros 133 to 185—from earlier levels around euros 200. Moreover VW has in place shareholder blocks from trade unions and federal states who would not sell.
Diesel cars overall are now in focus and this may give electric and hybrid cars a boost. More on tech today for paid subscribers.
More for paid subscribers follows from Spain, Switzerland, Mexico, Dominican Republic, Britain, India, Hong Kong, Canada, Brazil, Israel, and Finland.