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.
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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.
New Tables Posted
Our latest tables have been posted at www.global-investing.com where you can view the ones you are allowed to see. Everyone can see the closed positions, but only current subscribers get to see our current holdings and advice on them.
A correction of my note last week is necessary. It turns out that Benya Krik was not a Crimean Jewish gangster. He was an Odessa Jewish gangster. Isaac Babel, the author who created Benya, was born in Odessa Oblyat as well. Before the Russian Revolution, Babel became a protege of Maxim Gorky.
As an officer of the Red Cavalry Babel and his Cossacks marched into Sebastopol, Odessa, and Galicia (Poland). Sebastopol is in Crimea whereas Odessa while on the Black Sea is in historic Ukraine. In Sebastopol, Odessa, and Galicia the enemy forces included Ukrainians. Babel's men reached the outskirts of Warsaw and Riga, crossing what are now more national borders.
The Red Cavalry stories were published thanks to support from Gorky. The Benya Krik stories became a silent movie and a play shown in Odessa, Kiev, and the Moscow Art Theatre. But the movie was banned in 1930 shortly after Lenin died and Stalin succeeded him.
Babel later travelled to Paris (where his wife settled with their children, visiting Andre Malraux, and Ilya Ehrenberg) before Gorky summoned him to Moscow to help prepare the 1934 Soviet Writers' Conference. Gorky at this stage was a Menshevik, not exactly kosher either, but too important to be censored.
The SWC was attended by Malraux. Dissident Osip Mandelstam was arrested for reciting an anti-Stalin poem at the SWC. Babel, appalled at the collectivization and de-kulakization in the Ukraine, kept silent, but was barely more circumspect, beginning an affaire with the wife of NKVD head Nikolai Ivanovich Yezhov.
His play Maria was banned from performance at the Moscow Art Theatre by the NKVD in 1935. Babel managed one more trip to Paris with a Soviet delegation and again visited his family (and Vladimir Nabokov!), but did not seize the opportunity to escape. Back in Moscow, he worked on movie based on Gorky stories for Ilya Ehrenberg (which came out without screen credits to Babel). While he took another mistress he also continued his affaire with Yevgenia Feigenberg Yezhova.
By now Babel was not allowed to leave Russia. He was arrested in 1939, imprisoned in Lubiayanka, after confessing under torture to being a Trotskyite and a supported of Kamenev. He then publicly recanted right before being shot early in 1940. Yezhov did not survive long and he was replaced by Lavrenti Beria who was only killed after Stalin's death. Yevgenia died of poisoning either by her own hand or by her husband's.
In 1954, about the time that he turned Crimea over to Ukraine, Nikita Khushchev also signed the papers rehabilitating Babel. His works were still censored to remove criticism of Stalin and Trotskyist sentiments until 1994. In 2011 Ukraine unveiled a memorial to Babel in Odessa.
More for paid subscribers follows including a buy and a sell based on the above.
Stock News: Japan Gaming; Ireland Betting; Canada Mining; Mexico REIT; Israel, Belgium Biotech
Today as promised we write about the other Golden Hoard.
A couple in California unearthed maybe $10 mn-worth of historic US gold coins, writes Adrian Ash at BullionVault.
The coins were buried in 8 rusty tin cans in the late 19th century on land they now own. The website of Donald Kagin PhD, the coin dealer charged with selling them for top price, [exhibits them].
Kudos to Dr.Kagin. The global PR he's unleashed is priceles. Coin collectors worldwide will pay top Dollar for these coins. Because he's arranged for 90% of "the Saddle Ridge Hoard" (named after a geographical feature on the lucky couple's land) to be made available through Amazon.com/
Those old cans make a stark contrast with the shiny gold. Gold doesn't even react with water or air. That makes it perfect for long-term, low-cost storage.
Also note that "what's really significant about this find," as Kagin says, "is that unlike other hoards and treasures, this one includes a great variety of dates."The hoard seems to have been gathered and buried over a period of years because different cans held coins from certain years.
Worth $27,000 in the back-half of the 19th century (when the face value of a gold coin meant what it said) these coins were put aside in stages as each of the cans was filled up. This hoard was most likely somebody's life savings quietly built up over time.
Buried out in the Californian scrub, however, those careful savings were for some reason lost to them and their heirs forever.
All coin and jewellery hoards are fascinating. Who buried it? Why? And what happened to mean that they left it there making it worthless to the owners?
Lost treasure also therefore provides a key lesson for today's savers and hoarders. Know where your wealth is stashed, and make sure your family know too.There's no profit in giving your treasure to a metal-detector after the grim reaper comes calling.
[And now, a word from our sponsor] What's more, unlike British Romans fleeing the Saxons or even Viking raiders fleeing terror themselves you may now safely bury a chunk of your wealth far overseas today, yet maintain full access to its value at all times, using wwwBullionVault.com (our advertiser).
The wolves of Wall Street are not necessarily in New York City or Long Island like the movie says. In fact there are wolves in Spanish boiler-rooms preying on British investors, especially seniors who are not savvy about investing. They behave just like the film crooks, blowing their huge profits on fast cars, gold watches, drugs, and sex.
Meanwhile wolves in India prey on bond-buyers who are lured in with high interest on their supposed holdings, but can never cash in on the principal. Britain and Spain have cracked down on the Marbella gangs and India may nab the fellow behind the bum bonds.
And Bloomberg reports that 7200 sales of stock by SEC staffers seem to indicate that they are insiders, acting on knowledge of SEC settlements before they became public. So our Washington DC government regulators may also have wolves.
More for paid subscribers follows from a Canada mine, a Mexican REIT, Irish and Japanese gaming sites, and Israeli and Belgian biotech startups plus other news:
Jordan Pharma News; Plus Golden Horde
Today we meet the Golden Horde which is different from the golden hoard, a stash of gold coins found on their land by a California couple. I will report on that hoard tomorrow.
Crimea has always been a melting-pot. It was first settled by Pontic Greeks, and then by Turkic Khazars, some of whom converted to Judaism in the 8th century. The Khazars in turn were defeated by The Golden Horde of Mongolian Tatars led by a son of Genghis Khan. The Horde kept their Crimean base after losing most of Russia. Then led by Timur (Tamberlane) the Crimean Tatars were defeated and became Shia Muslims. They in turn were defeated in a series of battles between 1554 and 1774 by Tsarist Russia in what is today Russia, Ukraine, and Kazakhstan. In 1783, under Catherine the Great, the last Muslim rules of Crimea fell.
In today's Crimea melting pot, elements are missing, like Pontic Greeks, Khazars, Tatars, and, my biggest lament, Jewish gangsters like Benya Krik. The Yiddish-speaking criminal was created by the Red Cossack commander Isaac Babel, a small fierce Jew put in charge of an elite cavalry regiment fighting against Wrangel's anti-Revolution White Army by Lenin and Trotsky.
Babel's Odessa Jewish gangster was an equally improbable figure. He appeared first in a book of short stories, and, in 1927, in a silent movie. Like Babel, the Cossack commander, Benya (full name Ben-Zion), also displayed considerable chutzpah. Benya was a Jewish MacHeath but less murderous. (Brecht copied Babel but both were influenced by John Gay's 18th century Beggar's Opera.)
In the late 1930s purges, Babel was shot at Stalin's orders and the Jewish Crimeans deported to Siberia. Later Tatars and Greeks, accused of supporting the German invaders, were also deported there by Stalin.
The Tatars were allowed to return in 1954. Ukraine was given the Crimea by Khrushchev.
The Pontic Greeks left Crimea for Greece. Jews left for Israel and America. With them they took Crimean songs like this one (which contains only two Slavic words):
Az men fort kayn Sevastopol,
Iz nit vayt fun Simferopol,
Dortn iz a stantsie faran.
Ver dar zuchn naye glikn?
S'iz a stantsie an antikl
In Dzhenkoye, dzhan, dzhan dzhan.
(Translation: As you exit Sebastopol,
It's not far from Simferopol.
There you'll find an old depot.
Why try finding a new fortune
When there's an old, antique one?
In Dzenkoye, dzhan, dzahn, dzahn.)
When the Soviet Union broke up, Crimea twice proclaimed independence but was persuaded to settle for autonomy within Ukraine in 1992. While there are few Jews left (mostly very old) there's plenty of anti-Semitism.
Today's blog is late because of an outrage. Your editor, an early contributor to www.seekingalpha.com, was banned from continuing as a contributor by Yosef Levenstein, its editorial director. He claims that my submissions take too much resources. That means the only way you can now follow my investing advice is by subscribing at www.global-investing.com as I will not be allowed to post any articles via Seeking Alpha. Levenstein twice asked that I "no longer submit articles for editorial review" after encouraging me to contribute last Dec.
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More follows for paid subscribers with three new results and news from Spain, Brazil, Canada, Ireland, India, Jordan, China, Singapore, and Portugal.
The Iceman Cometh. Snow was falling again and sticking. Now it is melting in the sun preparatory to freezing overnight.
Last night we went to see an extraordinary performance of an Ibsen play, Hedda [Gabler] at NYU sponsored by it and two other universities, Princeton and the State U of NY's Confucius Institute for Business, plus the Norwegian Embassy. It was performed in a foreign language with English supertitles above the stage. The language was not Norwegian, but Mandarin Chinese. Hedda had been turned into a magnificent and moving Yue Chinese Opera.
Yue (now Huangzhou), is at the end of the Grand Canal near Shanghai, a very boring high-rise city I railroad through without stopping 5 1/2 years ago. But it has its own musical tradition. In a twist on the Elizabethans, all the roles are played and sung by members of the same sex, in this case women. Zhou Yujun, who played Hedda (Haida in Chinese) was incredible waving her 10 yards of sleeve as she tore up the thesis of her former lover Wenbo (Loevborg) or jealously pulled the hair of her cousin Xiya (Thea) played by Mei Xiuwan.
I also was very taken with Shi Huilan, complete with moustache and wispy beard, who played the manipulative Master Bai (Brack). The music was Chinese but euphonious; the sets and costumes were Chinese; the texts rhymed in Chinese but I couldn't tell. The singing, backed by a Chinese orchestra, however exotic, made clear the emotions of Hedda, an intelligent woman who had married the wrong man for sensible reasons. It was a tour de force.
With so many colleges involved (full of Chinese students), the theater was packed to the gills. We skipped the post-opera chat with the writers, director, and performers which went on into the night.
Next month, also at NYU, the Chinese National Theatre company will perform Richard III which took London by storm in the 2012 Globe to Globe Shakespeare Festival.
The message is that not just in business, the world is also surprisingly flat in culture.
In an effort to increase its respectability after burning books by Wendy Doniger, Penguin is promoting another US based author on its list, Ved Mehta, who was affiliated with various US universities and a staff writer until 1994 for The New Yorker. Indian-born Oxford grad Ved, blind since childhood, may not realize what his publisher is up to.
I received a message from Stratfor.com warning spring break youths and their parents of the risks of abduction in Mexico, "know the risks when making your travel plans." Alas, while we are not headed for Cancun, we are booked into a Black Sea cruise this summer, starting and ending in Istanbul, and visiting Yalta and Sebastopol in the Ukraine. It also stops at Sochi. We've wanted to visit fabled Trebizond for years, another stop in the circuit.
More for paid subscribers including Dutch and Colombian company results, and partial results from Jordan. Plus news from Hong Kong, Canada, Mexico, plus Ireland, Israel, and India (a trifecta).