Drugs from Israel, Jordan, and Britain, One Safer Than the Little Blue Pill
Bengt Saelensminde writes in The Right Side, a UK stock newsletter:
Until last week, Warren Buffett seemed to be a keen Tesco devotee. I’m not entirely sure what got him so enthused in the first place - nor what’s got him dumping the stock now.
Maybe he felt Tesco was the closest Europe could come up with as a Walmart equivalent - an American grocer claiming about 25% of the US market.
With 30% of market share, Tesco is about the same over here. These are classic Buffett investments, old-fashioned bricks and mortar business, with big “economic moats” which make them hard to compete against.
But last week Buffett lightened up, cutting his stake in Tesco by nearly a third. Should holders consider dumping too?
It looks to me like Tesco’s “multi-channel” approach is clearly starting to pay-off. If it manages to add a coherent online strategy to its solid bricks and mortar businesses, it could turn a retail giant into a dotcom monster.
We sold TSCDY (the American Depositary Receipt) over 2 years ago after I figured its US venture had turned sour. Tesco began a chain of West Coast "Fresh 'n Easy" mini-marts to break into the USA. I am always concerned when British firms hop across the pond with a concept to conquer US markets. We have many differences despite our common language.
I couldn't imagine Californians driving to a wee shoppe when they could buy fresh produce at ethnic markets or settle for lots of standard fare at a big weekly trip to the monster supermarket. So we bailed despite my worrying about taking a step the Oracle of Omaha would not have copied.
Now Tesco is in trouble also in its home market according to Yahoo Finance:
Aldi’s sales growth in the U.K. accelerated to a record in the last 12 weeks as the discounter adds stores and gains shoppers with lower prices, ratcheting up the pressure on domestic market leader Tesco.
The budget grocer’s revenue increased 34% from a year earlier in the period ended March 2, researcher Kantar Worldpanel wrote today in an e-mailed statement. That boosted its market share to 4.3% from 3.3% a year ago.
Aldi and rival German discounter Lidl are winning favor with British shoppers as they cast aside stereotypes of being dark outlets where only low-income people would shop. Aldi this month topped an annual customer satisfaction survey conducted by the Which? consumer group, based on the quality of its fresh food, value for money, and simple store format.
The upscale Waitrose chain, which had topped the Which? poll since it started in 2007, had a record 5% of the U.K. grocery market in the latest 12-week period, according to Kantar. Tesco’s share slipped to 28.7% from 29.6% a year earlier as its sales fell 0.6%.
Walmart is present in the British supermarket business via a sub called Asda, also down-market. Walmart was unable to compete against Aldi and Lidl in Germany. Meanwhile a new UK up-market entrant is Whole Foods Market. The US firms may also hit turbulence in British waters.
More for paid subscribers follows from Britain, Canada, Israel, Hong Kong, Jordan, Switzerland, Italy, Germany, Russia, and Sweden.
Global M&A Deals for Yurts, Mines, Warehouses, Lubrifiant, Pharma, and E-Commerce Sites
Sometimes globalization is the answer. Despite some foot-in-mouth history, Larry Summers, ex-President of Harvard and former US Treasury Secretary, writing in this morning's Financial Times, rightly argues that better foreign policy by Congress can help save Ukraine. He points out how a bipartisan response to the occupation of Crimea can be aided if Republicans Congress want to do something besides attacking alleged Obama weakness.
Prof Summers backs measures like restoring funding for the International Monetary Fund now bottled up in committee. He also suggests allowing exports of US surplus natural gas to lower Western European (and Ukrainian) dependence on Russian Gazprom gas exports. He also backs a modest and results-driven funding program for Kiev based on cleaning up Ukraine's oligarchy-linked political system and providing a safety net for the poor.
Summers is famously linked to hands-off support for market solutions. This was his line when he was a top level advisor under the Clinton Administration. But he seems to have changed his tune to a more interventionist direction while also remaining a stalwart supporter of the existing global financial system.
Foxtons, a UK real estate sale and letting brokerage (and financier) is listing on the ADR market. It is also challenging the New York realtors' commission schedule by offering cut-rate services here. The stock has recently been downrated in its home market.
Usually Monday news is dominated by changes in how our stocks are rated. But not today. Today's news is dominated by mergers and acquisitions. There will be further technical upgrades to our website overnight Monday. Visit www.global-investing.com often but early.
More for paid subscribers follows from Italy, Singapore, Britain, Hong Kong, Brazil, Australia, Suriname, Guyana, Canada, Israel, India, and among the yurts of Inner and Outer Mongolia and the Crimean Tartars along with troubles in China affecting distant lands.
Model Portfolios Updated
As usual, I have updated the model portfolios at www.global-investing.com
Because our webhost is updated its settings, you should visit the site during the day, EST, and not later to see the spreadsheets you are qualified to view. They will be unavailable in the wee hours of Monday. To view them more easily, be sure to click the "printer friendly" button which will fit the tables into a computer screen.
More follows for paid subscribers:
1) I am cleaning up duplicates which were put into the tables to test the tracking error between Asian sites and US ones. This is causing a bit of confusion among readers who are not sure if they should be buying both. The answer is to buy one variant not two. Read more »
Others Tip Our Ideas in Korea and Canada Banking and Israeli Desalination
As former print journalist I wanted to give you all some insights on how poorly print (and print on the Internet) cover investments these days.
With much hemming and hawing, the Financial Times' Lex columnist wrote about the numbers at South Korea's big banks, (all of which have the last name "Financial" which I left off). We are already in this investment area.
"Woori, Shinhan, Hana, and KB have outpaced the market in price to book value metrics, rising by roughly a tenth since last June. Other Asian banks mostly weakened. Don't get excited. At 0.5 and (for Shinhan 0.7) times book value, they are still among the most porrly rated in Asia. The four made an average return on equity of 4.4% in 2013, the worst in 5 years.
"But the discount the four trade at, relative to Bloomberg's Asia banks index, is at its lowest point in at least two years. That suggest investors are looking forward. Profits for the sector may have halved last year, but in the 4th quarter, net interest margins rose for the first time in more than 2 years, albet by an average of just 2 basis points. Without considering interest rate expectations (higher by last 2014), margins should widen this year anyway as some high-cost funding is repaid. Lending to smaller group, which offer higher yields, will also help. Korea banks...could be a momentum trade. If the global economy keeps picking up, then the world's 7th-largest exporter and the banks financing it have room to improve too."
Today The Economist Insights Weekly Digest sent me (4x) an article headlined:
"Renminbi rising. Onshore and offshore perspectives on Chinese financial liberalisation".
The British spelling is ok, but the facts are wrong. The RMB is being pushed down by Chinese government intervention. I am appalled that nobody noticed at the respected UK weekly.
Thanks to an accident of geography, Patti the Biotech Maven scooped Bloomberg. Near San Diego, where she lives, an Israeli outfit is building a seawater desalination plant which, when it comes on-stream, in 2016 will be the largest in the Western Hemisphere. Israeli PM Binyamin Netanyahu signed a tech agreement with California Gov. Jerry Brown yesterday and afterwards boasted that Israel can help California deal with drought. He told Bloomberg TV:
"We in Israel don’t have a water problem. We use technology to solve it, in recycling, in desalination, in deep drip irrigation and so on. These technologies could be used by California to eliminate its chronic drought problem."
About 60% of Israel's land mass is desert, so it has had to fight drought, and not just with desalination. Israeli firms also have pioneered technology California needs: agricultural reuse of treated sewage, software warning systems for leaks, and computer-controlled drip irrigation. Desalination supplies a quarter of Israel's drinking water. Some 75% of sewage is recycled, the highest level in the world, supplying more than half the water used in agriculture.
The builder is owned 50:50 by two Israeli companies that are or were in our portfolio. More on this for paid subscribers along with news from India, South Korea, Israel, Italy, Mongolia, Holland, Belgium, Britain, and Russia. Read more »
Investing Putin-Style in Britain, Canada, and Australia
The Russian incursion into Ukraine is worrying the despot next door in Belarus, on which Putin has his eye. Putin likes to contrast the concern he feels for "the near abroad" with Western "experiment across the pond" in what he considers Russia's sphere of influence. Of course this sounds like imperialism but Lenin who wrote about imperialism is dead and has been discredited.
The two largest shareholders in world's largest potash producer company Uralkali JSC (listed as URKA in London) have now made approaches to the government of Alexander Lukashenko to work together. Renewing collaboration with Belarus opens the door to the possibility of ending the “potash wars,” which broke up the cartel last year and caused potash prices and fertilizer stocks worldwide to plummet.
Until last summer the global potash market was controlled by two legal export cartels, the Canpotex group in North America; and BPC, which combined URKA and Belaruskali, the latter controlled by the Lukashenko government in Minsk.
Now Dmitry Razumov, CEO of Onexim, the Russian owner of 21.75% of URKA, told Reuters that renewed cooperation with Belaruskali will be “beneficial” to both sides. Uralchem, which owns 20% or Uralkali, told The Financial Times that Uralchem agrees with Razumov on the matter. Onexim is controlled by Russian oligarch Mikhail Prokhorov and Uralchem by Russian oligarch Dmitry Mazepin. Both are friends of Putin.
Both Russian billionaires bought the holdings in Uralkali last year, during the conflict between Russia and Belarus after Uralkali exited the world potash cartel in July in a dispute with Russia and started producing flat out (against cartel rules). Belarus relies on potash for 20% of its budget and arrested the chief of URKA and Pres. Lukashenko said he would only be released if there was a change in URKA ownership.
The move against the cartel shocked the global potash market, causing potash and potash share prices to plummet. Today they are up even though it is not certain that the Russo-Belarus cartel can be put back together. URKA director Paul Ostling told the FT last year that it would be hard to put "Humpty Dumpty back together." He added: "We have created an omelette."
There were errors in my posting yesterday on Bitcoins. The production of the funny money will be halted not in 2040 but in 2140. Think long-term! Also 9 US state banking commissions are in a Bitcoin taskforce working out how to regulate and safeguard the market. Thanks to Prof. Mark Williams of BU School of Business Management for these corrections.
How to play the potash cartel's return brings us to a new stock. We are following the strategy I suggested yesterday, of investing alongside Vladimir Putin in foreign shares. Gossip in London says that oligarchs there are buying into Russia-linked shares to push off attempts at sanctions there to hurt Mother Russia, by creating more UK links to Russian firms like URKA.
That so much of the new strategy has been shared with the press shows that this is deliberate. So no, we won't buy URKA, or even BP. Our strategy is more subtle than that and of course will only be shared with paid subscribers.
There is other news from Japan, Russia, Britain, France, Spain, Israel, Ireland, Canada, Ethiopia (a first), Singapore, Brazil, follows for paid subscribers.
Bitcoins and Trading in Tandem with Pres. Putin
Your editor attended the posh but somewhat chaotic Lamb's Club debate sponsored by Marketwatch, a part of Dow-Jones, last night. Its title: Bitcoin Boom and Bust.
One of the debaters, Prof. Mark T. Williams at Boston U Business Management School, was the most negative panelist about Bitcoin. His prior career was at at commodities trading house and as a Federal Reserve Bank examiner, My report below is based on his views.
Prof Williams summarized the origins of the new money proxy in the wake of the global financial crisis and the rise in risks which resulted. Bitcoins were supposed to reduce the risks of inflation from "fiat currencies" created by politicized central banks. They were also supposed to be protected against fraud by "banksters", the source of losses of some $3 trillion-plus during the GFC.
Bitcoins were to be "mined" by computer geniuses using complex algorithms. There would never be more than a limited number of coins and their mining would be halted in 2040.
Trading was to be decentralized, without banks or intermediaries, and verified every 10 minutes. All trades would then become irrevocable. There was to be no insurance or FDIC.
The initial market reaction, as Prof. Williams pointed out, was a bubble which then popped. He noted that the lack of a centralized payments system or track put Bitcoin trading in the position of a locomotive running wild. To quote from an article he wrote in Jan. for Dealbook:
The speculative mania generated around Bitcoin has created a hyper asset bubble that is ready to pop. Since 2013, Bitcoin has risen from $13 to as high as $1,200, price appreciation of more than 9000%. There are 12.3 mn coins outstanding. Over 90% are hoarded, which helps to artificially inflate values.
Ownership is also extremely concentrated, increasing market manipulation risk. As prices have grown to the clouds, many Bitcoin millionaires have been minted along the way. But what supports these lofty prices? Bitcoin is neither a legal entity, nor a start-up, and no stock is available for investors to purchase. It has no management team, board, balance sheet, business plan, or even a coherent vision on how to commercialize technology that has been given away in the market for free.
While backed by libertarians, Bitcoins turned out to be used most by "Silk Road" drug dealers. Then last month the largest exchange, Mt. Gox in Japan and then other trading platforms in Britain and Poland reported that billions of untraceable Bitcoins were hacked, lost, or stolen from their vaults.
As a result the performance of Bitcoins has been rocky. Prof. Williams noted that Bitcoins are 7x more risky than gold; and 15 times more risky than US dollars. (As is customary, he used price variance as a risk measure. In this case it maybe a valid marker given the short period involved and the frequent triple-digit price moves.)
This morning I got an invitation from Quaffafew, a local quantitative analyst's club, for a Bitcoin do in Princeton NJ next week. It is NEWS if nothing else.
My husband wants to buy a Bitcoin for the future for our 5 grandchildren, 3 of them near BU. I think he's nuts. The kids' father, a money manager and a CFA thinks it an odd strategy too. Prof Williams says if you really want to buy them, the best source would be Coinbase in the US.
It is perhaps trustworthy-ish. Our son wrote:
The only natural buyers for Bitcoins are either other crooks or Chinese oligarchs trying to export their ill-got millions. So whatever safety they thought they were getting by hiding their wealth in Bitcoins has been rocked.
What my British-born husband is reacting to is the UK ruling that Bitcoins are not subject to Value Added Tax because they are currency and not commodities.The SEC says they are not securities. Of course you could argue the other side of both rulings.
All the states Prof Williams cited as busily figuring out what Bitcoins are really are looking out for their own interests. The same for the UK government or the SEC. Whatever Bitcoin was set out to be originally will be undermined (pun intended) by the arrival of regulation, capital requirements, licensing, consumer protection rules, and ultimately, taxation.
Prof Williams' remark about the Triffin paradox was apt: that if a Bitcoin fills a needed function in global systems, there has to be volume. But if too many Bitcoins are created the market will lose confidence in the instrument.
In Nov. 1960, economist Robert Triffin testified before Congress on his insight into the problem of the Bretton Woods System and proposed the creation of new global monetary instruments, Special Drawing Rights, to get away from the problematic dollar-gold link:
Continuous U.S. balance of payments deficits during the 1950s provided the world with liquidity, but had also caused dollar reserves to build up in the central banks of Europe and Japan. As the central banks redeemed these dollars for gold, the U.S. gold reserves dipped dangerously low.
Anyway if my husband decides to buy one of them things let's hope he picks a moment when the price
is low. As for the notion a supporter of Bitcoins proposed, a twice-daily price fixing like what is done for gold, this is beyond reason.
Today a fellow-NYer Kevin Maher filed suit against the 5 banks which set the London gold fix daily, accusing them of price manipulation.
More for paid subscribers follows from Ireland, Australia, Canada, Britain, China, Colombia, Canada, Russia, India, Spain, Chile, The Netherlands, Turkey, Ukraine, and Belarus.
Trading alerts are only for paid subscribers. Join them and your portfolio will be improved and you will become richer.
I did today's trade only at the eleventh hour because my Internet kept crashing. I think it was because tonight I am going to a seminar abut bitcoins and my email box is full of stuff about the meeting, which is being moved because it is proving so popular.
I am not Satoshi Nakamoto. Nor am I a member of the Silk Road. I do not have an identical twin.
www.global-investing.com, my website, doesn't accept payment in bitcoins, although we do accept payments in US dollars with foreign credit cards. I have no idea where the stolen bitcoins from the Mt Gox Exchange have gone.
More about today's trade follows.
German Salve for Pain in Spain
Today's modest recovery doesn't mean the crisis is over. However, I am reluctant to add to the wealth of commentary because the outcome is far from clear. I have consulted my horoscope and my crystal ball and my coffee grounds (I don't take tea in the morning) and I cannot get a clear signal on whether we are facing a Third World War or merely a bluff. So here are some comments from Prof. Mauro Guillén of the Wharton School (U of Pa), a Spanish sociologist, on how the European financial crisis can be ended.
He pooh-poohed the chatter among international civil servants and pundits that Spain can see the light at the end of the tunnel already. He also brushed off any optimism about foreign direct investment or mergers and acquisitions in Spain. If George Soros was investing $150 mn in Spanish real estate this doesn't mark a trend, but only the strategy of "a vulture and billionaire."
Leaving it to nature to cure problems like high Spanish unemployment (particularly among the under-25s), slow growth, and loss of domestic demand, he remarked last night, might work short- and even medium-term, but not long term. Being from deficit country Spain, he insists that the sustainable solution for resolving the surplus countries. The leader of that group, of course, in Germany.
For Prof. Guillén, there is reason for hope now that Germany's Christian Democrats have joined in a coalition government with the SPD's Social Democrats. The SPD platform calls for higher minimum wages. Germany is close to reaching a budget surplus which could permit tax cuts. Germany's current account surplus is the largest in the world.
Given the data, it would not be hard for the Angela Merkel government to cede to demand that Germany raise wages, cut taxes, and invest abroad. The impact would be to help deficit countries like Spain, Italy, Greece--and even France--achieve growth thanks to exports to Germany's new big spenders.
In fact Prof. Guillén argues that for Germany to help out "is in its own self-interest." Within Germany, the big fear is inflation. Without more cheap foreign goods, more money in German pockets could boost prices and hurt Germany's most dynamic firms, the small and medium sized ones which would be the first to be hit with wage pressures if prices rise.
Of course Germany is not alone. Prof. Guillén cites Austria and Finland as other countries in the same boat.
Nor is he without a full program of self-help measures for Spain ranging from trying a coalition government in Madrid to tax enforcement. Mainly, as you would expert from a Wharton prof, he wants to see more credit for Spanish smaller companies, "the lifeblood of a market economy." He would like to see some of the local politicos and banks face the music for the real estate and infrastructure excess of the pre-crisis years. He claims that only a dozen Spaniards have been ousted from banking jobs in the wake of the financial crisis, compared to several hundreds in London alone.
More for paid subscribers on how to play Spain follows including two reporting companies, a Altneu stock idea from Frida Ghitis, and news from Canada, Chile, Brazil, Ireland, Australia, Japan, Argentina, Canada, Israel, Hong Kong, Colombia, and Mongolia.
Never Let a Panic Go Unexploited
Never let a panic go unexploited.
The omens are terrible. It is March, the month of the God of War.
It is just 100 years since the outbreak of The Great War, the slaughterhouse of World War I, which began with failure to realize that mobilizations and ultimatums have consequences. We are hearing lots of call-ups and threats.
There already was a stupid Crimean War between Russia and some European countries (for details, read "The Charge of the Light Brigade"; and recall that more soldiers died of infection than from their wounds until Florence Nightingale organized nurses.)
In fact, the very omens probably mean it ain't gonna happen.
To quote Karl Marx, "history repeats, the first time as tragedy, the second time as farce." Even since the Georgia carve-up of 2008, Russia has become more integrated into the world economic system. That means western powers have are mechanisms to hurt an aggressive Russia which were not available during the George W. Bush presidency. Then Russia was able to quickly defeat the government of Mikhail Saakashvili which called up its troops.
Like Georgia, Ukraine, which moreover has an unelected government, is reacting with call-ups to try for a military response. Like Georgia, Ukraine is hopelessly outclassed militarily. Like Georgia, Ukraine will probably break up into ethnic enclaves.
This time, Vladimir Putin may win the battle, but lose the war. The valid threat of economic sanctions by the US and NATO countries hit the ruble today, and the Russian Central Bank intervened to stop the fall. It raised ruble interest rates from 5.5% to 7% as both the dollar and the euro hit historic highs against the Russian currency.
Meanwhile stocks around the world are down. Gold and the dollar are up. This creates opportunities and risks for the global investing community discussed below, along with trading alerts.